Original article Microeconomics

SIMPLIFY AND IMPROVЕ: REVISITING BULGARIA’S REVENUE FORECASTING MODELS

Fabio A. Telarico
Received: 13 Feb 2023
Revised:
Published:
Downloads: 0
Citations: 0
Issue 6/2022
JEL H2 C5 C87
DOI https://doi.org/10.56497/etj2267601

Abstract

Abstract: In the thirty years since the end of real socialism, Bulgaria has gone from having a rather radically ‘different’ tax system to adopting flat-rate taxation with marginal tax rates falling from figures as high as 40% to 10% for both the corporate and personal income tax. Crucially, the econometric forecasting models in use at the Bulgarian Ministry of Finance hinted at an increase in tax revenue compatible with the so-called ‘Laffer curve’. Similarly, many economists held the view that revenues should increase. However, reality fell short of those expectations based on forecasting models and rooted in mainstream economic theory. Thus, this paper asks whether there are better-performing forecasting models for personal and corporate income tax revenues in Bulgaria that are readily implementable and overperform the ones currently in use. After articulating a constructive critique of the current forecasting models, the paper offers readily implementable, transparent alternatives and proves their superiority.

How to cite this article

Telarico, F. A. (2022). Simplify and Improvе: Revisiting Bulgaria’s Revenue Forecasting Models. Economic Thought Journal, 67 (6), 633-654. https://doi.org/10.56497/etj2267601

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