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Persistence in Tax Revenues: Evidence from Some OECD Countries

Author

Listed:
  • Guglielmo Maria Caporale
  • Silvia García Tapia
  • Luis Alberiko Gil-Alana

Abstract

This paper examines persistence in tax revenues in a set of 21 OECD countries over the period 1965-2021 using long-range dependence techniques based on fractional integration. The results imply that there are only a few cases of mean reversion: one for total revenue (Switzerland); three for VAT (Belgium, Italy, and Spain), and six for tax on income (Austria, Belgium, Finland, Spain, Sweden and USA). The analysis is also carried out for inflation in the same set of countries. Again the I(1) hypothesis cannot be rejected in most cases, mean reversion only occurring in Korea, Iceland, Norway and Sweden. However, stronger evidence of mean reversion is found for the differences between the three original tax series and inflation compared to the tax series themselves, which points to the existence of a linkage between taxation and inflation, especially in the case of VAT and tax on income.

Suggested Citation

  • Guglielmo Maria Caporale & Silvia García Tapia & Luis Alberiko Gil-Alana, 2023. "Persistence in Tax Revenues: Evidence from Some OECD Countries," CESifo Working Paper Series 10682, CESifo.
    • Handle: RePEc:ces:ceswps:_10682
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    References listed on IDEAS

    as
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    6. Abdul Qadir Patoli & Tayyab Zarif & Nadeem A.Syed, 2012. "Impact Of Inflation On Taxes In Pakistan: An Empirical Study Of 2000-2010 Period," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 8(2), pages 31-41.
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    13. Diebold, Francis X. & Inoue, Atsushi, 2001. "Long memory and regime switching," Journal of Econometrics, Elsevier, vol. 105(1), pages 131-159, November.
    14. Abbritti, Mirko & Carcel, Hector & Gil-Alana, Luis & Moreno, Antonio, 2023. "Term premium in a fractionally cointegrated yield curve," Journal of Banking & Finance, Elsevier, vol. 149(C).
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    19. Mirko Abbritti & Luis A. Gil-Alana & Yuliya Lovcha & Antonio Moreno, 2016. "Term Structure Persistence," Journal of Financial Econometrics, Oxford University Press, vol. 14(2), pages 331-352.
    20. Abdul Qadir Patoli & Tayyab Zarif & Nadeem A. Syed, 2012. "Impact Of Inflation On Taxes In Pakistan: An Empirical Study Of 2000-2010 Period," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 8(2), pages 8-4.
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    More about this item

    Keywords

    revenues; taxes; persistence; fractional integration; long memory;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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