Work detail

Estimating Tax Revenue Elasticities in Slovakia

Author: Mgr. Edita Ďurovčíková
Year: 2017 - summer
Leaders: doc. PhDr. Tomáš Havránek Ph.D.
Work type: Finance, Financial Markets and Banking
Language: English
Pages: 62
Awards and prizes:
Abstract: To study the effect a change in a tax base has on the corresponding tax revenue
is a useful tool to better predict future tax revenues. This property is called
a tax revenue elasticity b u t generally it does not get as much attention as it
deserves, and when it does, key points like using d ata adjusted for the effects
of tax reforms or distinguishing between the short-run (instantaneous) and the
long-run (equilibrium) elasticity are often om itted. In my thesis, I am the first
one to estim ate the tax revenue elasticities for Slovakia. I use a unique dataset
adjusted for the effects of tax reforms and tax changes to estim ate both the
short-run and the long-run elasticities for the three tax categories th a t account
for the m ajority of each year’s tax revenue - Personal Income Tax, Corporate
Income Tax and Value Added Tax. I obtain a long-run elasticity of 0.98,
1.28 and 0.94 for the Personal Income Tax, the Corporate Income Tax and the
Value Added Tax respectively and a short-run elasticity of 3.51 and 1.93 for the
Corporate Income Tax and the Value Added Tax respectively. I do not obtain
a significant estimate in the case of the Personal Income Tax. Additionally, I
find th at it takes more than a year for the elasticity to reach its equilibrium
value for all the three tax categories and th at there is an asymmetric behaviour
of the short-run elasticity according to the amount of the tax revenue in the
case of the Corporate Income Tax.
December 2017



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