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Macroeconomic Effects of Tax Rate and Base Changes: Evidence from Fiscal Consolidations
Author:
Ms. Era Dabla-Norris
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and
Frederico Limanull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2018: Issue 220
Language:
English
Publication Date:
28 Sep 2018
DOI:
https://doi.org/10.5089/9781484377451.001
ISBN:
9781484377451
ISSN:
1018-5941
Pages:
47
Keywords:
tax base; tax rate; narrative dataset; tax multipliers; tax shock; estimated tax; tax measure; tax multiplier; debt ratio; Personal income tax; Corporate income tax; Value-added tax; Southern Europe; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper examines the macroeconomic effects of tax changes during fiscal consolidations. We build a new narrative dataset of tax changes during fiscal consolidation years, containing detailed information on the expected revenue impact, motivation, and announcement and implementation dates of nearly 2,500 tax measures across 10 OECD countries. We analyze the macroeconomic impact of tax changes, distinguishing between tax rate and tax base changes, and further separating between changes in personal income, corporate income, and value added tax. Our results suggest that base broadening during fiscal consolidations leads to smaller output and employment declines compared to rate hikes, even when distinguishing between tax types.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2018: Issue 220