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Electoral cycles in tax reforms

Author

Listed:
  • Antonio C. David

    (International Monetary Fund)

  • Can Sever

    (International Monetary Fund)

Abstract

We examine electoral cycles in tax reforms using monthly data over the period 1990–2018 for 22 advanced economies and emerging markets. We show that governments tend to avoid announcing tax reforms during the months running up to elections. In addition, they become more likely to announce those reforms in the first few months following elections, suggesting that “political capital" and/or “political opportunity" channels play a role in the timing of reforms. These patterns are broad-based regarding changes in the tax base and rates, and for various types of taxes. We also find that the pre-election decrease in the likelihood of tax reform announcements appears to be stronger in emerging markets, and weaker in countries with relatively better institutional quality. Finally, our results indicate that neither fiscal rules nor IMF programs seem to have differential effects on electoral cycles in tax reforms.

Suggested Citation

  • Antonio C. David & Can Sever, 2024. "Electoral cycles in tax reforms," Empirical Economics, Springer, vol. 67(2), pages 495-529, August.
    • Handle: RePEc:spr:empeco:v:67:y:2024:i:2:d:10.1007_s00181-024-02558-3
    DOI: 10.1007/s00181-024-02558-3
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    Keywords

    Tax reforms; Electoral cycles; Political economy; Institutional quality;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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