Abstract
Staff Studies is the bi-annual (March and September) peer-reviewed journal of the Central Bank of Sri Lanka. The Journal aims at stimulating innovative research for the analysis of current macroeconomic issues and policy challenges faced by central banks while providing a forum to present recent theoretical and empirical research.
Highlights
A primary motivation for tax reforms in developing countries has been the need for increased revenues
T = Axb where it is assumed that when incomes change by a certain factor k, tax liabilities change by kb which leads to an increase in tax revenues
Taxes are not greatly responsive to changes in income with most elasticity coefficients registering below unity
Summary
A primary motivation for tax reforms in developing countries has been the need for increased revenues. The need to raise more revenue against the backdrop of high expenditures has taken added importance when compared to other sources of resource mobilisation such as deficit financing and money creation. Tax systems have been revamped and restructured with the objective of maximising tax revenues from the reform process. In this regard, tax elasticity - the responsiveness of tax revenues to income at a given rate structure. 1/ This paper forms part of a thesis submitted by Y. Indraratna for the Ph.D. degree at the University of London. Richard Disney for his guidance and supervision of this paper and Dr N.
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