Estimating VAT Revenues from Tax Reform in Transition Economies

Abstract

Quantitative analysis is a key aspect of the design and evaluation of tax policy. To make informed decisions, policy makers should know how much revenue is collected and from whom. Tax reforms planned for transition economies should include the introduction not only of new tax structures but also of new models to estimate revenues. Preliminary methodologies can be developed in time to influence the current discussions on the design of tax legislation. These efforts will also lay the groundwork for the further development of databases and models that will be used to evaluate tax policy in the years ahead.

The author is Senior Economist, Federal Reserve Bank of Boston, and former Senior Advisor, U.S. Department of Treasury Advisory Programs for Central and Eastern Europe and the former Soviet Union. This chapter is drawn closely from the author’s remarks at a seminar on tax reform sponsored by the Federal Ministry of Finance of Czechoslovakia, March 14–15, 1992 and published (in Czech) in Finance A Úver. The views expressed in this article do not necessarily represent those of the Federal Reserve Bank of Boston or the U.S. Treasury Department.