OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Revenue Buoyancy and its Fiscal Policy Implications

Tax receipts surged between 2005 and 2007 in many OECD countries, resulting in significant improvements in headline fiscal positions. As a consequence, pressures for tax cuts and for public spending increases have emerged. In the past, responding to such demands has permanently weakened budget positions as revenue windfalls ultimately proved to be temporary. Hence, the opportunity to address structural deficit problems and prepare for future demographic trends has been lost, and the ability to respond to subsequent cyclical downturns has been weakened. This paper provides an analysis of the factors behind recent revenue buoyancy and examines past responses to unexpected revenue gains. It also discusses whether improved information on fiscal positions and future fiscal challenges, combined with relevant fiscal rules, might help in avoiding a repetition of past errors in fiscal policy.


Keywords: fiscal rules, fiscal policy, windfall tax revenues
JEL: H3: Public Economics / Fiscal Policies and Behavior of Economic Agents; H6: Public Economics / National Budget, Deficit, and Debt; H2: Public Economics / Taxation, Subsidies, and Revenue
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