FISCAL POLICY AND OPTIMAL TAXATION: EVIDENCE FROM A TAX SMOOTHING EXERCISE

Gerhard Reitschuler

Scottish Journal of Political Economy, 2010, vol. 57, issue 2, 238-252

Abstract: Testing the tax smoothing hypothesis for the EU‐15, we hypothesise that the introduction of the 3%‐deficit rule of the Maastricht Treaty in 1993 may have inhibited tax smoothing as European Union (EU)‐member states are no longer capable of letting the deficit grow as much as implied by expected decreases in government expenditure. Our results show that for some countries this fiscal rule may have indeed changed the validity of the tax smoothing hypothesis, thus implying that EU accession has caused welfare losses.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:bla:scotjp:v:57:y:2010:i:2:p:238-252

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