An econometric approach to the relationship between tax revenue and gross national expenditure in Romania

This paper derives analytical expressions for the revenue elasticity of consumption taxes and combined income‐consumption tax systems, analogous to those familiar for income taxes. It provides measures of tax revenue elasticities which can readily be applied in practice. Analytical results suggest that, unlike income taxes, consumption tax revenues are likely to be income‐inelastic in practice, and total income plus consumption tax revenue, though generally elastic, can be expected to decline over time in the absence of counterveiling fiscal reforms. The results also provide some insight into the effects on tax revenue growth (often unintended or unknown) of reforms made with other policy objectives in mind.

This paper scrutinizes whether government borrowing in Eastern Europe is grounded on the need to provide infrastructure and public amenities as provided in the budget or is triggered by government deficit budgeting. European Union countries have experienced accelerated growth in public debt in the last half a century despite growing tax revenue and cuts in public spending. The purpose of this paper is to investigate the direct and indirect links among public debt, tax revenue and government expenditure in four Eastern European member states from 1998 to 2022 using secondary statistics collected from the World Bank and Eurostat. The paper utilizes a fully modified ordinary least squares (FMOLs) approach and Dumitrescu-Hurlin causation tests to examine the long-run relationship between the factors. For the robustness check, the Levin-Lin-Chu (LLC) unit root test was used to specify the stationarity of each series. In addition, Kao cointegration estimation was used as a robust long-run estimator. The results indicate that directly, a reduction in tax revenue and an increase in government spending increase public debt in the long run. Indirectly, simultaneous tax revenue increase and government spending increase will lead to budget deficit cuts, which will in turn reduce public borrowing. The finding confirms that the adverse impact of public spending on government debt holds only for countries with less tax revenue collection. The study recommends that government and policymakers develop strategies and policies for long-term debt management geared at reducing public debt to match the gap between tax revenue and government expenditure thereby cutting endless public borrowing and anticipated budget deficit.

The main objective of this article is to empirically examine the short and long-run relationship between real tax revenue and real local government expenditure as well as investigate the relationship between real sales tax revenue and real individual tax revenue and selective variables in Washington, D.C. for the period ranging from 1984-2015. The study uses the Johansen co-integration techniques as well as the bivariate and multivariate vector error correction model (VECM). The results indicate that there is a unidirectional and one-way causality running from real local government expenditure to the real DC’s tax revenue in the short and long-run, but not vice versa. The finding indicates that DC’s tax revenue changes local government expenditure. As a result, budget deficits can be avoided by implementing policies that stimulate DC’s tax revenue. The Granger-causality test shows that DC resident employment does affect real individual tax in the short and long-run, simultaneously. The Granger-causality test shows that DC resident employment, household’s population and stock of housing does affect real sales tax revenue in the short and long-run simultaneously. Furthermore, the results of the impulse response function (IRF) indicate that household’s population and stock of housing are the major short-run effect on the real individual income tax and real sales tax revenue.

The growth effects of the government’s own tax revenue and capital expenditure were estimated for the Union Territory of Puducherry using the ordinary least squares multivariate regression model for 2005–2018. The results suggested that both government’s own tax revenue and capital expenditure had significant positive effects on the economic growth of the Union Territory. For example, one unit increase in capital expenditure could boost economic growth (NSDP) by 13%. Similarly, one unit change in the government’s own tax revenue collection could potentially change the NSDP of the Union Territory by 30%. Therefore, the Puducherry government can focus on increasing its capital expenditure to enhance its economic growth. Similarly, it can increase its own tax revenue (the taxes under its jurisdiction) by broadening its tax base. These may help the government boost its growth and thus correct its internal fiscal imbalance.

Insufficient allocation of resources and infrastructure remains two daunting challenges of human capital development in Nigeria despite government policy measures to efficiency of resources and infrastructure development. This paper examined the effect of tax revenue proxy by value added tax and infrastructure on composite health and education in Nigeria from the period 1980- 2021. This paper utilized the simulation approach in forecasting performance of the macroeconometric model. From the results, the following were observed: First, value added tax has positive and statiscally significan effect on government expenditure on education and health. This implies that an increase in tax revenue causes increase in government’s spending on education and health in Nigeria. Second, health is not a good channel through which tax revenue can be used to influence economic growth, relative to education. Education impacts more on human capital in Nigeria than health. Three, higher investment in infrastructure or higher infrastructure will increase economic growth and human capital development. Four, positive and significant relationship exist between value added tax revenue and government expenditure on education and health. This implies that increase in tax revenue causes increase in government spending on social and community services including health and education. Five, to increase human capital development in Nigeria, temporary tax revenue shock is sufficient. This implies that the growth reducing effect of government tax via permanent increase in value added tax revenue. Six, to increase human capital development in Nigeria, permanent infrastructure development and investment is required. From the results, the following were observed: First, value added tax has positive and statiscally significan effect on government expenditure on education and health. This implies that an increase in tax revenue causes increase in government’s spending on education and health in Nigeria. Second, health is not a good channel through which tax revenue can be used to influence economic growth, relative to education. Education impacts more on human capital in Nigeria than health. Three, higher investment in infrastructure or higher infrastructure will increase economic growth and human capital development. Four, positive and significant relationship exist between value added tax revenue and government expenditureon education and health. This implies that increase in tax revenue causes increase in government spending on social and community services including health and education. Five, to increase human capital development in Nigeria, temporary tax revenue shock is sufficient. This implies the growth reducing effect of government tax via permanent increase in value added tax revenue. Six, to increase human capital development in Nigeria, permanent infrastructure development and investment is required. The study recommended that: (i) The government should increase its investment on critical infrastructure to further bolster human capital development and by extension accelerate the rate of economic growth, (ii) The government should diversify its revenue base and expend more on health and education in addition to building a strong institutional framework to ensure the efficacy of government spending on both health and education. Keywords: Tax revenue, infrastructure, composite health, education, simulation , Nigeria JEL Codes: H24, I10, E27 DOI: 10.7176/JESD/14-6-04 Publication date: March 31 st 2023

In this article, Ayaka Behro and Michael Smart explore the impact of COVID-19 on provincial government finances. While spending rose in all provinces in the 2020-21 fiscal year, so did revenues in many provinces, cushioning the impact on deficits. While grants and income tax revenues rose in many provinces, largely owing to federal policies, consumption tax and natural resource revenues fell sharply. Comparing provinces, higher COVID-19 caseloads were associated with higher health spending and lower consumption tax revenues. These findings suggest that COVID-19 has had a more damaging impact on provincial finances than initial forecasts had suggested.

This study empirically examined the effect of tax revenue and government expenditure on sustainable development goals in Nigeria. The ex-post facto research design was adopted using time series data sourced from the Central Bank of Nigeria's statistical bulletin and World Bank database. The study covered 22 years from 2001 to 2021. Descriptive and inferential statistical tools were used in analyzing the data after carrying out unit root tests on the stationarity of the series to avoid obtaining invalid and unauthentic regression estimates. The Vector Error Correction Model (VECM) was applied in analyzing the relationship. The study found that Tax Revenue (TR) exhibited a negative and significant effect on sustainable development goals, while Government expenditure (GEXP) indicated a positive and significant effect on Sustainable Development Goals (SDGIS) in the long run. Furthermore, the study revealed that in the short-run Tax Revenue (TR) and Government expenditure (GEXP) both had a negative effect on the SDGIS in Nigeria. There is need for government to develop strategies to broaden the tax base and bring more entities into the tax net while ensuring equitable contribution. They should also align budget allocations with SDG priorities to ensure tax revenue is directed sustainable development projects. Hence the study recommended that government should channel its resources towards closing up infrastructural deficits while increasing productive units that would enhance the economy and ensure optimal utilization of tax revenue towards sustainable developments in Nigeria especially in the achievement of the Sustainable development goals.

How Does Governance Modify the Relationship between Public Finance and Economic Growth: A Global Analysis

On Transformation of Idea of China’s Fiscal and Tax Laws

BackgroundThe Covid-19 pandemic is an economic and a health crisis. Households reduced consumption expenditures as large-scale physical distancing measures, lower disposable incomes and fear of infection when engaging in many types of economic activity took hold. This, in turn, reduced domestic tax revenues at a time when governments were facing increased financial pressures to strengthen and sustain welfare states.MethodsWe developed a simulation model, the Covid-19 Taxination Simulator, to estimate potential economic gains and tax revenues attributable to vaccine rollouts. We apply the model to 12 European Union countries which had low vaccination rates at the beginning of 2022.ResultsThe highest growth in aggregate personal consumption expenditure attributable to Covid-19 vaccines administered as of January 2022 is in Greece (10.8%), Slovenia (8.6%) and Czechia (8.6%), while the lowest is in Bulgaria (2.2%) and Slovakia (2.1%). If countries had vaccinated 85% of their adult population, the largest gains in consumption tax revenues would be expected in Romania (830 million Euros) and Poland (738 million Euros). Consumption tax revenues generated by meeting the 85% of the adult population target would, on their own, be large enough to fully cover the costs of expanding the vaccine rollout itself in Estonia, Latvia, Slovenia, Croatia, Czechia, Hungary and Greece.ConclusionCovid-19 vaccination rollouts not only save lives and relieve pressures on health systems, they also support economic growth and generate additional tax revenues. These revenues can partially offset the costs of vaccines programmes themselves.

Objective – The paper is aimed at examining the relationship between government tax revenue, non-tax revenue and government expenditure in Nigeria. Design/methodology – Quantitative research design was employed. Secondary data were collected from Central Bank of Nigeria statistical bulletin, World Bank, World Data Atlas and Federal Inland Revenue Service. The study covers the period of 2010 to 2018. Meanwhile descriptive statistics was used to analyzed the data. Results – The findings of the study discovered that, there is a relationship between government revenue and government expenditure, and the Nigerian government revenue and expenditure is in line with the spend-and-revenue hypothesis. That is government revenue only respond to previous changes in expenditure. Thus, government is expected to generate enough tax revenue to enable it meet government expenses as revenue from oil is decreasing. This signifies that whenever there is high government expenditure, it is required that government must raise higher revenue, and in Nigeria, government expenditure is always higher than the revenue resulting to budget deficit. In addition, tax revenue was found to have been increasing even though at a slower rate. Limitation/Suggestion - The study recommends that Nigerian government should cut down current expenditures on wages, acquisition of goods and services that are unnecessary and increase capital expenditure. Increase in capital expenditures on education, infrastructures and health care will boast the economic activity and which will in turn increases government tax revenue.

Chapter 2 analyses the drivers of changes in consumption tax revenues during economic downturns, with the global financial crisis (2007-09) as a case study, and uses these insights to understand how the COVID-19 crisis will affect tax revenues.

The revenue income and expenditure of the government of Nepal is reviewed and analyzed. Service and function wise current expenditure and capital expenditure and tax and non-tax revenue is focused for the study. The major sources of revenue of government of Nepal are tax on income, profits and capital gain, taxes on payroll and workforce, tax on property, tax on goods and services, tax on international trade and transaction and non-tax revenues are collected from property income, sale of goods and services, penalties, fines and forfeiture etc. The main objective of the study is to examine the causal relationship between government revenue and spending/expenditure of government of Nepal. Augmented Dickey-Fuller test (ADF testing) is applied to examine the unit root test. Granger Causality Tests (VAR approaches) is used to see the causality of the variables. The model is not suffering from serial correlation in residual. It does not have heteroskedasticity and residuals are normally distributed. The study found that the variables are co-integrated and have long run association among all three variables i.e. total expenditure. tax revenue and non-lax revenue. Therefore the restricted VAR that is Vector Error Correction Model (VECM) is run. It is also found that there is long run causality from tax and non-tax revenue to total expenditure. The total expenditure log I and lag 2 can jointly cause non-tax revenue meaning that total expenditure can affect the non-tax revenue.

In this study, the relationship between tax revenue, government expenditure, and economic growth has been examined for Canada, France, Germany, Italy, Japan, UK, and the USA—the G7 countries using annual data from 1980 to 2016. The study used two different panel causality approaches in order to make a comparison. According to the time domain panel causality test results, there are a bidirectional causality between economic growth and government expenditure but unidirectional causality between tax revenue and government expenditure. Moreover, there is no causal relationship between economic growth and tax revenue. On the other hand, frequency domain causality results show that there are a bidirectional short- and long-run causality between economic growth and tax revenue, and long-run causality between economic growth and government expenditure. The main finding is that the taxation policies to be implemented on the basis of the economic conjuncture of G7 countries are a powerful financial tool, with the potential to serve the economic objectives to be achieved.

The objective of this article is to estimate the impact of three fiscal instruments (direct taxes, indirect taxes, and government expenditure) on Bulgaria’s economic growth. The study employs an autoregressive distributed lag model (ARDL) and Eurostat quarterly seasonally adjusted data for the period 1999–2020. Four control variables (the shares of gross capital formation, household consumption, and exports in GDP as well as the economic growth in the euro area) are included in the model to account for the influence of non-fiscal factors on Bulgaria’s real GDP growth rate. The empirical results indicate a long-run equilibrium relationship between Bulgaria’s economic growth and the independent variables in the ARDL. In the short term, Bulgaria’s real GDP growth rate is affected by its own past values and the previous values of the shares of direct tax revenue, exports, government consumption, and indirect tax revenue in GDP. In the long term, Bulgaria’s economic growth is influenced by its own previous values and the past values of the share of household consumption in GDP and the euro area’s real GDP growth rate. Fiscal instruments can be used to stabilize Bulgaria’s growth in the short run but they are neutral in the long run. The direct tax revenue, government consumption, and indirect tax revenue are highly effective and can be used as tools for invigorating and stabilizing Bulgaria’s economic growth in the short run. However, in the long term, the real GDP growth rate can be hastened only by encouraging domestic demand (final consumption expenditure of households) and promoting exports. This research cannot answer the question of whether flat income taxation stabilizes the economy or not, since it does not separate the impact of tax rate changes from the influence of tax base modifications.