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Assessing the variability of indirect tax elasticity in Greece

Author

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  • Athanasios O. Tagkalakis

    (Bank of Greece)

Abstract

This paper shows that the variability of indirect tax elasticity relative to GDP has increased significantly in recent years in Greece. Based on this finding we show that the budgetary sensitivity of indirect taxes following a 1% change in real GDP has increased dramatically since 2010. This finding has substantial policy implications; failure to account for these higher elasticities will lead to recurrent revenue shortfalls requiring new policy measure to meet previously set fiscal targets. This could lead to a downward spiral of continuously declining economic activity, new revenue shortfalls and additional fiscal measures and so on.

Suggested Citation

  • Athanasios O. Tagkalakis, 2014. "Assessing the variability of indirect tax elasticity in Greece," Working Papers 171, Bank of Greece.
    • Handle: RePEc:bog:wpaper:171
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    File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper2013171.pdf
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    References listed on IDEAS

    as
    1. Tagkalakis, Athanasios O., 2013. "Audits and tax offenders: Recent evidence from Greece," Economics Letters, Elsevier, vol. 118(3), pages 519-522.
    2. Olivier J. Blanchard & Daniel Leigh, 2013. "Growth Forecast Errors and Fiscal Multipliers," American Economic Review, American Economic Association, vol. 103(3), pages 117-120, May.
    3. AfDB AfDB, . "Annual Report 2012," Annual Report, African Development Bank, number 461.
    4. Mr. Tigran Poghosyan, 2011. "Assessing the Variability of Tax Elasticities in Lithuania," IMF Working Papers 2011/270, International Monetary Fund.
    5. Ms. Cemile Sancak & Jing Xing & Ricardo Velloso, 2010. "Tax Revenue Response to the Business Cycle," IMF Working Papers 2010/071, International Monetary Fund.
    6. John Brondolo, 2009. "Collecting Taxes During an Economic Crisis; Challenges and Policy Options," IMF Staff Position Notes 2009/17, International Monetary Fund.
    7. World Bank, 2009. "Pakistan - Tax Policy Report : Tapping Tax Bases for Development - Summary Report," World Bank Publications - Reports 3099, The World Bank Group.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Rajmund MIRDALA, 2016. "Effects of Fiscal Policy Shocks in the Euro Area Lessons Learned from Fiscal Consolidation," Journal of Advanced Research in Law and Economics, ASERS Publishing, vol. 7(8), pages 2236-2276.
    2. Kasselaki, Maria Th. & Tagkalakis, Athanasios O., 2016. "Fiscal policy and private investment in Greece," International Economics, Elsevier, vol. 147(C), pages 53-106.
    3. Zheng, Liping & Severe, Sean, 2016. "Teaching the macroeconomic effects of tax cuts with a quasi-experiment," Economic Analysis and Policy, Elsevier, vol. 51(C), pages 55-65.
    4. Fotini Economou & Ioanna Kountouri & Yannis Panagopoulos & Georgia Skintzi & Ekaterini Tsouma, 2022. "Estimating excise tax revenue elasticity and buoyancy for tobacco products and alcoholic beverages: evidence from Greece," Applied Economics, Taylor & Francis Journals, vol. 54(39), pages 4557-4576, August.

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    More about this item

    Keywords

    indirect taxes; elasticity; GDP; Greece;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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