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Keywords

Revenues, Taxes, Persistence, Fractional integration, Long memory

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Abstract

This paper examines persistence in tax revenues in a set of 21 OECD countries over the period 1965–2021 using long-range dependence techniques based on fractional integration. The results imply that there are only a few cases of mean reversion: one for total revenue (Switzerland); three for VAT (Belgium, Italy, and Spain), and six for tax on income (Austria, Belgium, Finland, Spain, Sweden and USA). The analysis is also carried out for infation in the same set of countries. Again the I(1) hypothesis cannot be rejected in most cases, mean reversion only occurring in Korea, Iceland, Norway and Sweden. However, stronger evidence of mean reversion is found for the diferences between the three original tax series and infation compared to the tax series themselves, which points to the existence of a linkage between taxation and infation, especially in the case of VAT and tax on income

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This article is licensed under a Creative Commons Attribution 4.0 International License