Acta Oeconomica Pragensia 2006, 14(3):48-62 | DOI: 10.18267/j.aop.86

Tax Revenue Prediction under Condition of Imperfect Control over Tax-Collecting Authority

Stanislav Klazar
Ing. Stanislav Klazar, Ph.D. - senior lecturer; Department of Public Finance, Faculty of Finance and Accounting, University of Economics, Prague, nám. W. Churchilla 4, 130 67 Praha 3, Czech Republic, klazar@vse.cz

Public revenue forecasts should be accurate and unbiased, it means they should be the best estimates (in statistical view) of expected receipts. This paper analyzes the possible reasons for biased (overestimated or underestimated) tax revenue forecasts. Our modification of Danninger's theoretical model demonstrates that systematically (over a long period) and intentionally (deliberately) biased revenue forecasts can be result of the government's (principal's) attempt to increase the effort of tax-collecting authority (agent) to collect revenue. We carry out empirical analysis to test one of the model implications - relation between effort and relative grow of tax revenue. We use data from the years 2004 and 2005 for Corporate Income Tax collected in 16 tax-collecting authorities.

Keywords: revenue forecast, principal, agent, biased forecast, agency theory
JEL classification: H2, H3

Published: October 1, 2006  Show citation

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Klazar, S. (2006). Tax Revenue Prediction under Condition of Imperfect Control over Tax-Collecting Authority. Acta Oeconomica Pragensia, 14(3), 48-62. doi: 10.18267/j.aop.86
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