How sensitive is Irish income tax revenue to underlying economic activity?

September 11, 2017 | Journal Article

Authors: Yota Deli , Derek Lambert , Martina Lawless , Kieran McQuinn , Edgar Morgenroth
Economic and Social Review , Vol. 48, No. 3, Autumn 2017, pp. 305-316

In this paper we examine the elasticity of Irish personal income taxation revenue with respect to aggregate national output – both GDP and GNP. This enables us to estimate the sensitivity of this key taxation aggregate with respect to changes in economic activity. Understanding the elasticity of the different taxation components vis-à-vis their underlying economic activity should enable policymakers to place the public finances on a more sustainable footing and hence avoid the sharp booms and busts that have characterised Irish taxation receipts over the past 20 years.

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