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How is tax policy conducted over the business cycle (English)

It is well known by now that government spending has typically been procyclical in developing economies but a cyclical or countercyclical in industrial countries. Little, if any, is known, however, about the cyclical behavior of tax rates (as opposed to tax revenues, which are endogenous to the business cycle and hence cannot shed light on the cyclicality of tax policy). The authors build a novel dataset on tax rates for 62 countries for the period 1960-2013 that comprises corporate income, personal income, and value-added tax rates. The authors find that, by and large, tax policy is a cyclical in industrial countries but mostly procyclical in developing countries. Further, tax policy in countries with better institutions and or more integrated with world capital markets tends to be less procyclical or more countercyclical.

Details

  • Author

    Vegh Gramont,Carlos Alberto, Vuletin,Guillermo Javier

  • Document Date

    2015/08/01

  • Document Type

    Journal Article

  • Report Number

    123180

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    2018/02/09

  • Disclosure Status

    Disclosed

  • Doc Name

    How is tax policy conducted over the business cycle?

  • Keywords

    tax policy; tax rate; personal income tax rate; marginal personal income tax rates; industrial country; average marginal income tax rate; access to international capital markets; corporate income tax rate; business cycle; tax revenue; tax rate change; change in tax policy; high marginal tax rate; tax base due; statutory tax rate; tax index; personal income taxation; tax rate data; total tax revenue; price of export; real government spending; corporate tax rate; standard vat rate; cross country variation; tax policy outcome; form of tax; implicit tax rate; aggregate tax revenue; real exchange rate; world capital market; average tax burden; growth of trade; tax policy change; types of taxes; terms of trade; list of countries; ratio of revenues; high tax rate; assessment of tax; multiple tax rates; business cycle volatility; average tax rate; industrial economy; instrumental variable; real gdp; negative correlation

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Citation

Vegh Gramont,Carlos Alberto Vuletin,Guillermo Javier

How is tax policy conducted over the business cycle (English). Author accepted manuscript Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/340281518157057488/How-is-tax-policy-conducted-over-the-business-cycle