The stability of tax elasticities in The Netherlands

Leon Bettendorf () and Duncan van Limbergen
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Leon Bettendorf: CPB Netherlands Bureau for Economic Policy Analysis

No 256, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: We estimate long-run and short-run elasticities of Value Added Tax and Personal Income Tax revenues with respect to their bases for the Netherlands. We find VAT elasticities around one in the long-run and short-run. The long-run PIT elasticity is significantly below one, while the short-run elasticity is around one. We experiment with alternative definitions of the tax base for both taxes. We first find that elasticity estimates remain unaffected by using a broader base for both taxes. Second, the conclusion on whether elasticities differ between `good' and `bad' times depends whether the definition of these regimes is based on the deviation of tax revenues from the long-run level or on the output gap. Third, stability over time cannot be rejected for all elasticities, except for the long-run PIT elasticity to the broad base.

JEL-codes: E62 H24 H68 (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:cpb:discus:256

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