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Short- and long-run tax elasticities: the case of the Netherlands

Guido Wolswijk ()

No 763, Working Paper Series from European Central Bank

Abstract: This paper provides estimates for the base elasticities of Dutch taxes, paying particular attention to differences between short-and long-term elasticities, and allowing for asymmetric adjustment. Estimates are presented for five tax categories for the period 1970-2005, after making appropriate corrections for effects of discretionary tax measures. The empirical results indicate that shortterm elasticities often are lower than long-term ones, notably when taxes are subdued. Consequently, shocks to tax revenues tend to be aggravated by the dynamics of short-term elasticities. Ignoring differences between short- and long-term elasticities contributes to revenue ‘surprises’ and an incorrect assessment of the fiscal stance. JEL Classification: H2, H62, H68

Keywords: fiscal indicators; income elasticity; Tax revenue; The Netherlands (search for similar items in EconPapers)
Date: 2007-06
Note: 339143
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