SHIFTING FROM LABOR TO CONSUMPTION TAXES: THE IMPACT ON TAX REVENUE VOLATILITY
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PRZEJŚCIE OD OPODATKOWANIA PRACY DO OPODATKOWANIA KONSUMPCJI – WPŁYW NA ZMIENNOŚĆ DOCHODÓW PODATKOWYCH PAŃSTWA
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The paper provides estimates of tax revenues with respect to their individual tax bases, focusing on differences between long- and short-run elasticities and allowing for asymmetries in the speed of adjustment as well as in short-run volatility. Estimates are presented for two major tax categories in Poland: value added tax, and employer and employee social contributions for the 1999-2013 period. The authors’ results indicate that long-run elasticities are close to unity. An analysis of short-run elasticities based on considering their asymmetric responses to economic fluctuations, complemented by a rolling regression exercise, suggests that VAT revenues are subject to greater volatility. Therefore, a shift in taxation from labor income to consumption increases the sensitivity of public finances to the business cycle.
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