business cycle is also important from the point of view of the government’s intertemporal budget constraint and tax smoothing objectives. Second, assessing country-specific tax buoyancy allows to ascertain if the government is keeping tax mobilization in line with economic activity, and estimating individualtaxbuoyancieshelps identify the weak and strong spots of the revenue system. Both analyses allow the fiscal authorities (i) to ascertain if more effort should be put into mobilizing revenues, and (ii) to better direct this effort at increasing the share of those
year is then multiplied by the corresponding base values and the products summed up; and v) the divisia index which introduces a proxy for discretionary tax measures.
4. Additionally, estimation of individualtaxbuoyancieshelps shed more light on the weaknesses and strengths of the systems and allows fiscal authorities to identify taxes which have high income elasticity and are thus better reform targets when trying to increase overall tax revenue . Moreover, understanding how and why revenues respond to the business cycle is important from the point of view of
In this paper we provide short- and long-run tax buoyancy estimates for 107 countries (distributed between advanced, emerging and low-income) for the period 1980–2014. By means of Fully-Modified OLS and (Pooled) Mean Group estimators, we find that: i) for advanced economies both long-run and short-run buoyancies are not different from one; ii) long run tax buoyancy exceeds one in the case of CIT for advanced economies, PIT and SSC in emerging markets, and TGS for low income countries, iii) in advanced countries (emerging market economies) CIT (CIT and TGS) buoyancy is larger during contractions than during times of economic expansions; iv) both trade openness and human capital increase buoyancy while inflation and output volatility decrease it.
This Selected Issues paper offers policy recommendations for Senegal to reach high and sustained growth with the goal of exiting low-income country status. For Senegal to reach Plan Sénégal Emergent (PSE) objectives, reforms under the PSE need to create space for small and medium-sized enterprises and foreign direct investment to thrive. Reform of Senegal’s business environment needs to be accelerated. Macrostructural reforms should be stepped up in the energy sector, in which Senegal still ranks 170th in the world. Progress in the electricity sector can be achieved by continuing to improve reliability of supply and reduce electricity costs. Reform of the taxation system, by simplifying procedures and optimizing the tax rates, is another macro-critical area in which Senegal needs to make significant strides.