Publication: PFR Fundamentals: Tax Buoyancy
Loading...
Date
2025-04-29
ISSN
Published
2025-04-29
Author(s)
Editor(s)
Abstract
Medium-term fiscal sustainability relies on accurate projections of revenue mobilization. Assessing whether a government aligns tax mobilization with economic activity is important for prudent spending choices. Revenue projections depend on assumptions about how revenues will respond to changes in economic growth in the future, and the two concepts of tax elasticity and tax buoyancy are most used to assess this. While closely related, these two concepts are different and produce different outcomes. The objective of this note is to recommend a methodological approach for country economists to estimate buoyancy when analyzing a country’s tax systems, for example, when writing a Public Finance Review (PFR). The note presents theoretical underpinnings and describes alternative econometric approaches and data for estimating short-run and long-run tax buoyancy. Results and practical implementation of the proposed methodology are displayed.
Link to Data Set
Citation
“World Bank. 2025. PFR Fundamentals: Tax Buoyancy. © World Bank. http://hdl.handle.net/10986/43133 License: CC BY-NC 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Philippines Quarterly Update, September 2011 : Solid Macroeconomic Fundamentals Cushion External Turmoil(Manila, 2011-09)The Philippines Quarterly Update provides an update on key economic developments and policies over the past three months. It also presents findings from recent World Bank work on the Philippines. As of September 2011 due to sluggish exports and government spending, economic growth was lower than expected. The Philippine economy continued to decelerate during the first half of 2011 as investment and exports contracted. Private consumption growth remained robust, rising by 5.4 percent in the first half of 2011 and contributing 3.6 percentage points to GDP growth in Q2 2011. A contraction in construction spending slowed down growth of fixed capital formation. On the supply side, the resilient services sector was the main source of growth. The Philippines' external position and macroeconomic fundamentals remain strong. Monetary policy remains accommodating, while the fiscal deficit is likely to fall below target. After a strong rebound in 2010, economic growth in 2011 is likely to remain around 5 percent with downside risks. The challenge for policymakers is to ensure that the Philippines continues to improve its competitiveness, while cushioning the economy from adverse external shocks.Publication Liberia Public Expenditure Review : Options for Fiscal Space Enlargement(Washington, DC, 2013-05)Liberia's post-conflict reconstruction and rehabilitation has been successful. Peace, stability and security gradually returned and provided an enabling environment for the rebuilding of this war-torn country. Over the next five years (2013-2017), the Bank will focus on building infrastructure (energy and transport), increasing youth employment opportunities, strengthening human development and sustaining peace and security. This note considers how to increase Liberia s fiscal space by examining four options: 1) improving the efficiency of public expenditure, 2) increasing external grants, 3) increasing domestic revenue, and 4) increasing borrowing (domestic and/or external). While any increase in fiscal space gained from the first two options will not impose a burden in terms of debt or tax on the economy, the latter two will impose such burdens. In its examination of public expenditure by economic classification, this note finds that fiscal space in Liberia can be created by further improving the technical efficiency of current expenditure (wages and salaries, goods and services and transfers to state owned enterprises). However, the size of the fiscal space gained from these measures is difficult to pinpoint.Publication Afghanistan : Building an Effective State, Priorities for Public Administration Reform(World Bank, Washington, DC, 2008-01-23)This report looks at the implications for public administration reform over the next 5-10 years, and proposes a priority agenda for action by the Government of Afghanistan (GOA) and the donor community. The report reviews the prospects and priorities for public administration reform in three key areas: building an effective civil service, improving local governance and service delivery, and making government accountable to the people. This report has made the case that public administration reform in Afghanistan is both very important and very difficult: very important because it will provide the Government o f Afghanistan with the capacity to respond to popular demands for good governance and improved service delivery; very difficult, because of the inherent challenges o f institutional change, especially in the current political and security situation in Afghanistan. Public Administration Reform (PAR) is a long-term task -This will require persistent effort over time, as well as innovative approaches to improve service delivery in the short and medium terms. Afghanistan's experience over the past five years, as well as lessons from other fragile states, provide some clues about how to go about public administration reform.Publication Afghanistan - Building an Effective State : Priorities for Public Administration Reform(Washington, DC, 2008-01)This report looks at the implications for public administration reform over the next 5-10 years, and proposes a priority agenda for action by the Government of Afghanistan (GOA) and the donor community. The report reviews the prospects and priorities for public administration reform in three key areas: building an effective civil service, improving local governance and service delivery, and making government accountable to the people. This report has made the case that public administration reform in Afghanistan is both very important and very difficult: very important because it will provide the Government o f Afghanistan with the capacity to respond to popular demands for good governance and improved service delivery; very difficult, because of the inherent challenges o f institutional change, especially in the current political and security situation in Afghanistan. Public Administration Reform (PAR) is a long-term task -This will require persistent effort over time, as well as innovative approaches to improve service delivery in the short and medium terms. Afghanistan's experience over the past five years, as well as lessons from other fragile states, provide some clues about how to go about public administration reform.Publication Sudan(Washington, DC, 2011-10)Public investment to facilitate growth and poverty reduction is paramount to Sudan's development challenge. The acute need for rebuilding the country's deteriorated infrastructure and service delivery framework underscores the importance of more active and effective public investment. The disproportional composition of the spending adjustment raises particular concern on pro-poor and public investment spending during the subsequent fiscal adjustment period expected to follow. Under the growing fiscal decentralization trend, the state governments have taken up the primary responsibility to provide basic public service deliveries to the poor; in such a decentralized constellation, reduced support from the federal budget could seriously jeopardize the provision of basic services at the state and locality level. In particular, public investment expenditure now has to effectively address service delivery needs and the broader development agenda, while at the same time the overall resource envelope is declining. This note is the result of a rapid assessment of Sudan's public investment portfolio in the context of the anticipated fiscal adjustment. It is not a full-fledged review on public investment projects or the public investment management system. The main scope of the assessment is: to quickly identify available information on public investment projects from existing sources; to provide an contextual overview of the overall public investment portfolio in light of the imminent needs for rationalizing the public investment portfolio; and to outline conceptual guidelines for public investment adjustments and to propose longer-term tasks to improve public investment management.
Users also downloaded
Showing related downloaded files
Publication Tunisia Economic Monitor, Fall 2024(Washington, DC: World Bank, 2024-11-14)The Tunisian economy experienced a modest growth of 0.6 percent in the first half of 2024, following zero growth in 2023. By the end of 2024, Tunisia is projected to be the only country in its region with a real GDP still below pre-pandemic levels. The limited recovery in agriculture, coupled with declines in the oil and gas, garments, and construction sectors, hindered economic growth. Below-average rainfall restricted agricultural growth, which only recovered a third of the significant losses from the first half of 2023. The garment sector suffered due to reduced demand from the European Union, Tunisia's main export market. Oil and gas production continued its decade-long decline due to a lack of new investments, and the construction sector was impacted by limited domestic demand and challenging external financing conditions.Publication Gabon Economic Update(Washington, DC: World Bank, 2024-10-29)The Gabon Economic Update is an annual World Bank publication that presents an overview of the evolving macroeconomic position in Gabon, followed by a detailed exploration of a specific topic in each edition. The first chapter analyzes recent economic developments, key development challenges, as well as the macroeconomic outlook and risks for Gabon’s future growth. It presents policy actions that could help strengthen fiscal and debt sustainability, contain food inflation, promote job creation, and sustain a resilient growth path. The second chapter of this year’s economic update has a special focus dedicated to fiscal policies for the forestry sector. This chapter analyzes how fiscal policy reforms for forestry can contribute to generating more fiscal revenues, creating more jobs, and promoting sustainable production methods. This report is based on data available as of May 2024.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication South Asia Development Update, April 2025: Taxing Times(Washington, DC: World Bank, 2025-04-23)Growth prospects for South Asia have dimmed. The global economic environment has become more challenging and is a source of heightened downside risks. After a decade of repeated disruptions, South Asia’s buffers to cushion new shocks are slim. Tackling some of its greatest inefficiencies and vulnerabilities could help South Asia navigate this unusually uncertain outlook: unproductive agricultural sectors, dependence on energy imports, pressures from rising global temperatures, and fragile fiscal positions. For most South Asian countries, increased revenue mobilization is a prerequisite for strengthening fiscal positions. Even taking into account the particular challenges of collecting taxes in South Asian economies—such as widespread informal economic activity and large agriculture sectors—South Asian economies face larger tax gaps than the average emerging market and developing economy (EMDE). This suggests the need for improved tax policy and administration. Until fiscal positions have strengthened, the burden of climate adaptation will disproportionately fall on the private sector. If allowed sufficient flexibility, private sector adaptation could offset about one-third of the likely climate damage by 2050. This may, however, require governments to remove obstacles that prevent workers and firms from moving across locations and activities. As growth prospects dim, the challenge grows to create jobs for South Asia’s rapidly expanding working-age population. South Asia’s large diasporas could become a source of strength if their knowledge, networks, and other resources can be better tapped for investment and trade.Publication CEMAC Economic Barometer, November 2024, Vol 7(Washington, DC: World Bank, 2025-01-03)The CEMAC Economic Barometer is a semi-annual World Bank publication that presents a snapshot of recent developments and the economic outlook of the CEMAC region, followed by a brief assessment at the country level. It includes a focused technical section on a theme of regional relevance. This edition’s special topic provides policy options for the CEMAC countries to address challenges in the forestry sector, such as effectively designing fiscal instruments, improving forest governance, and increasing financial and technical support from the international community. It highlights how fiscal instruments can incentivize sustainable forestry and generate government revenue.