Electoral Cycles of Tax Performance in Advanced Democracies

Endrit Lami and Drini Imami

CESifo Economic Studies, 2019, vol. 65, issue 3, 275-295

Abstract: It is widely accepted that incumbents in democratic societies may use various economic policies to increase their chances of re-election. But incumbents in the most advanced democracies may be restrained in overtly manipulating economic policy instruments before elections, because more experienced voters could penalize them for such opportunistic behavior. Incumbents may embrace indirect and more ‘camouflaged’ means such as opportunistically relaxing the stance of tax revenue performance before elections, either by laxer collection efforts, additional tax exemptions or preferential treatments, or a combination of these. In this article, we present evidence of election-related cycles in the tax revenue performance of 25 Organization for Economic Co-operation and Development advanced democracies. We empirically analyze the collection effectiveness of Value Added Tax (VAT) around elections. The findings reveal significant deterioration of VAT revenue performance before elections.

Keywords: political budget cycles; tax collection effectiveness; advanced democracies; VAT Revenue Ratio (search for similar items in EconPapers)
JEL-codes: E62 H26 P16 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (9)

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