Electoral cycles in tax reforms

Antonio David and Can Sever ()
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Can Sever: International Monetary Fund

Empirical Economics, 2024, vol. 67, issue 2, No 5, 495-529

Abstract: Abstract We examine electoral cycles in tax reforms using monthly data over the period 1990–2018 for 22 advanced economies and emerging markets. We show that governments tend to avoid announcing tax reforms during the months running up to elections. In addition, they become more likely to announce those reforms in the first few months following elections, suggesting that “political capital" and/or “political opportunity" channels play a role in the timing of reforms. These patterns are broad-based regarding changes in the tax base and rates, and for various types of taxes. We also find that the pre-election decrease in the likelihood of tax reform announcements appears to be stronger in emerging markets, and weaker in countries with relatively better institutional quality. Finally, our results indicate that neither fiscal rules nor IMF programs seem to have differential effects on electoral cycles in tax reforms.

Keywords: Tax reforms; Electoral cycles; Political economy; Institutional quality (search for similar items in EconPapers)
JEL-codes: D72 D78 E02 E63 H20 P51 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Electoral Cycles in Tax Reforms (2022)
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DOI: 10.1007/s00181-024-02558-3

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