Proposal for an Alternative Indicator for Testing the Presence of the Political-Budget Cycle in the Case of Tax Policy

Křápek Milan and Lucie Formanová

NISPAcee Journal of Public Administration and Policy, 2017, vol. 10, issue 2, 229-249

Abstract: The content of this paper is a proposal for a new explanatory variable that can be used instead of commonly used variables expressing the dates of parliamentary elections. The proposed variable is then used to verify the existence of the impact of the political-budget cycle in the area of taxation on a sample of countries belonging to the European Union (EU28) over the period from 2000 to 2012. Combining the use of this variable and the Pearson correlation coefficient, a statistically significant effect of PBC was identified, particularly in the field of indirect excise taxes, and especially for countries belonging to the group of new EU Member States. The article also contains a comparison of results using traditional indicators which take into account the date of parliamentary elections and the results using a new variable. The results obtained show that with the help of two of the four indicators, statistically significant changes in tax policy in the area of indirect excise duties were identified. When evaluating a new variable, it can be noted that it is a variable which is appropriate for testing the effect of PBC, since not only has the number of statistically significant correlation coefficients been increased, but additionally, illogical results contrary to PBC theory have not been identified.

Keywords: political-business cycle; political-budget cycle; tax burden; implicit tax rates; labor; consumption; parliamentary election; European Union (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:njopap:v:10:y:2017:i:2:p:229-249:n:11

DOI: 10.1515/nispa-2017-0020

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