Explaining Government Revenue Windfalls And Shortfalls: An Analysis For Selected EU Countries

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In recent years, government revenues in many EU countries experienced significant and erratic changes, which, a priori, could not be fully explained by macroeconomic developments or by discretionary fiscal policy measures. The authors investigate this issue by estimating "Unexplained" changes in tax and social contribution revenues, based on proxies for tax revenue bases and elasticities commonly used for forecasting or cyclically adjusting government revenues and taking into account estimates of the impact of legislation changes. This is done for a selection of EU countries, including the "Big five" euro area countries (Germany, Spain, France, Italy and the Netherlands) together with Ireland, Latvia and Portugal.