On the Rationality of Medium-Term Tax Revenue Forecasts: Evidence from Germany

Christian Breuer

No 176, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: In the present paper I examine tax revenue projections in Germany over the period 1968 to 2012 with a focus on forecasting rationality. I show that tax revenue forecasts for the medium-term are upward biased. Overoptimistic revenue projections are particularly pronounced after the German reunification and reflect upward-biased GDP projections in this period. The predicted tax-GDP-ratio appears to be upward biased, as well. The forecasts are likely to overestimate tax revenues if the redicted tax-GDP-ratio exceeds its structural level of approximately 22 ½ percentage points. The results also indicate that forecast errors of short-term projections for the current year exhibit serial correlation. It is conceivable that the specific institutional setting can explain this non-rational behaviour to some extent.

JEL-codes: E62 H20 H68 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: On the Rationality of Medium-Term Tax Revenue Forecasts: Evidence from Germany (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ifowps:_176

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