The project investigates and assesses tax revenue forecasting methodologies utilised in OECD countries. Concentrating on the major tax types within each country, the different approaches towards forecasting will be illustrated. A critical discussion of forecasting accuracy as a benchmark of method validity will be performed.
Analysis of forecasting errors; Testing for institutional factors.
National Budgets, OECD, Literature, Expert know-how
The international comparison of revenue forecasting reveals a range of differences between the approaches that are used in the analyzed countries. Some countries increase independence by consulting external experts, either when the revenue forecast itself or the underlying macroeconomic forecast is prepared. Other countries delegate the revenue forecast to research institutes. Regarding the organizational framework the only considerable difference lies in the time gap between forecast and the forecasted period. Concerning the methodology it can be observed that income and corporation taxes are forecasted with methods that use macroeconomic variables, while it is done for excise taxes with data of the respective tax from previous years. Some countries embed the forecast into a macroeconomic model. An analysis of the quality of forecasts shows that more than two thirds of the differences in accuracy regarding the whole revenues can be explained by differences in the tax structure, the time gap, and the degree of independency. Concerning the independency a positive effect on the accuracy can be observed. A more differentiated tax structure has a considerable positive effect on the accuracy.
Thiess Büttner, Björn Kauder, Methoden der Steuerschätzung im internationalen Vergleich, ifo Forschungsbericht No 44, 2008 (Abstract).
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