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Electoral Cycles of Tax Performance in Advanced Democracies

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  • Endrit Lami
  • Drini Imami

Abstract

It is widely accepted that incumbents in democratic societies may use various economic policies to increase their chances of re-election. But incumbents in the most advanced democracies may be restrained in overtly manipulating economic policy instruments before elections, because more experienced voters could penalize them for such opportunistic behavior. Incumbents may embrace indirect and more ‘camouflaged’ means such as opportunistically relaxing the stance of tax revenue performance before elections, either by laxer collection efforts, additional tax exemptions or preferential treatments, or a combination of these. In this article, we present evidence of election-related cycles in the tax revenue performance of 25 Organization for Economic Co-operation and Development advanced democracies. We empirically analyze the collection effectiveness of Value Added Tax (VAT) around elections. The findings reveal significant deterioration of VAT revenue performance before elections.

Suggested Citation

  • Endrit Lami & Drini Imami, 2019. "Electoral Cycles of Tax Performance in Advanced Democracies," CESifo Economic Studies, CESifo Group, vol. 65(3), pages 275-295.
    • Handle: RePEc:oup:cesifo:v:65:y:2019:i:3:p:275-295.
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifz008
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    Cited by:

    1. Fuest, Clemens & Gründler, Klaus & Potrafke, Niklas & Ruthardt, Fabian, 2024. "Read my lips? Taxes and elections," Journal of Public Economics, Elsevier, vol. 236(C).
    2. Lami, Endrit & Imami, Drini & Pugh, Geoffrey & Hashi, Iraj, 2021. "Fiscal performance and elections in the context of a transition economy," Economic Systems, Elsevier, vol. 45(2).
    3. Antonio C. David & Can Sever, 2024. "Electoral cycles in tax reforms," Empirical Economics, Springer, vol. 67(2), pages 495-529, August.
    4. Endrit Lami, 2023. "Political Budget Cycles in the Context of a Transition Economy: The Case of Albania," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(2), pages 221-262, June.
    5. Imami, Drini & Lami, Endrit & Pojani, Dorina, 2022. "Informal construction as political currency: A theory of ‘election-driven informality’," Land Use Policy, Elsevier, vol. 112(C).
    6. Vladan Ivanovic & Endrit Lami & Drini Imami, 2023. "Political Budget Cycles in Early Versus Regular Elections: The Case of Serbia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(3), pages 551-581, September.
    7. Lucia Rossel Flores & Martijn Huysmans & Joras Ferwerda, 2024. "The political business cycle of tax reforms," Public Choice, Springer, vol. 200(1), pages 65-88, July.

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    More about this item

    Keywords

    political budget cycles; tax collection effectiveness; advanced democracies; VAT Revenue Ratio;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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