The Effect of Inflation on the Income Elasticity of Taxes
This paper defines the relationship between the nominal (or money) income elasticity and the real income elasticity of a tax system. Under most circumstances, the real and the nominal income elasticities differ. This difference has not been recognized by economists who rely strictly on nominal elasticities as an indicator of revenue adequacy or tax burden, a practice which can be misleading, especially under conditions of general price inflation. The income tax, sales tax and property tax are analyzed briefly in terms of their elasticity features.
The Built-In Flexibility of Income and Consumption Taxes
This paper reviews, and synthesises within a uniform framework, a number of analytical results on the built-in flexibility of taxation. Established results for income taxes are reviewed and integrated with recent results for consumption taxes. These help to provide a better understanding of the determinants of the revenue responsiveness properties of different taxes. They also provide convenient expressions for the calculation of tax revenue elasticities in practice. It is shown that the magnitude of revenue elasticities can be expected to differ substantially for alternative taxes, for different forms of the same tax, and for the same tax over time as incomes change relative to tax thresholds and as consumption patterns change. These results are especially relevant for the many industrialised countries which have undertaken major fiscal reforms in recent years with, often unintended, consequences for revenue elasticities. Copyright 2002 by Blackwell Publishers Ltd
Fiscal Transparency in EU Accession Countries Progress and Future Challenges
This paper discusses the findings of fiscal transparency reports on standards and codes (ROSCs) for most EU accession candidate countries. Emphasis is given to the need to establish effective and accountable medium-term budget frameworks to establish policy credibility and anchor adjustment programs to meet EU fiscal goals. Adoption of budgeting and accounting standards consistent with the IMF Government Finance Statistics Manual 2001 framework will also help link budget decisions to EU standards of fiscal reporting. More consistent and comprehensive coverage of off-budget activities is needed for assessing fiscal risk and sustainability. Finally, local government issues need to be addressed by many of these countries since EU fiscal goals are set with reference to general government. Progress in all of these areas can be monitored by keeping fiscal ROSC assessments up to date.