Working Party on Tax Revenue Forecasting
Project period: ongoing
Research Areas:
The Working Party on Tax Revenue Forecasting (AKS) is an advisory board of the Federal Ministry of Finance.
Currently the Working Party consists of the following institutions:
- Federal Ministry of Finance
- Federal Ministry of Economic Affairs and Energy
- Finance ministries of the federal states
- Institute for the World Economy at the University of Kiel (IfW)
- Halle Institute for Economic Research (IWH)
- RWI Essen
- German Institute for Economic Research (DIW) Berlin
- ifo Institute – Leibniz Institute for Economic Research at the University of Munich
- Deutsche Bundesbank
- German Cities Council
- German Council of Economic Experts
- Federal Statistical Office
Content
The Working Party on Tax Revenue Forecasting (AKS) prepares two forecasts a year – in May and November – on tax revenue in Germany. The estimates are for the current and for the coming year. In May, the forecast also takes three subsequent years into account. Since 1955 the federal government has included the results of the AKS in its budget plans and since 1968 in its medium-term fiscal plans. The ifo Institute has participated in the AKS since its foundation in 1955.
The Working Group was created in 1955 as a result of a disagreement over expected tax revenue between the Federal Ministry of Finance and the Ifo Institute. The government realised that using scientific methods for estimating and forecasting tax revenue in Germany can be very useful in budget planning. In addition, the composition of the Working Group ensures the independence of the forecasts. Recent studies on international tax revenue forecasts show that the independence of the forecasting institutions is a major factor in the quality of the forecasts.
The AKS makes no recommendations on fiscal policy. However, the results are frequently used to examine the short- and medium-term viability of the public budgets and to assess the chances and limitations of fiscal-policy reform measures.
Forecasting method
The estimation of German tax revenue is conducted separately according to tax categories. The foundations for the estimation are the assumptions of the Federal Ministry for Economic Affairs and Energy as well as the estimated impact of changes in taxation law by the Federal Ministry of Finance. The inclusion of various institutions in the revenue estimation enables a model-heterogeneity and leads to the on-going expansion of estimation methods.
The estimation of the revenue in individual tax categories is conducted on the basis of estimated values on the development of the individual assessment bases, the elasticity of the tax by the Finance Ministry and the delays which come from the levying of the tax. Recently, the ifo Institute is increasingly relying on econometric time-series models in order to empirically determine the assessment basis, elasticity and delay of the individual tax categories.
Publications on the Project
The Federal Ministry of Finance issues a report on the results of the AKS meetings twice a year – in May and November. A report on the AKS results is available at the website of the Federal Ministry of Finance.
The results are published under the rubric Tax Revenue Forecast and commented on in the following issue of ifo Schnelldienst. Since November 2008 the results are published in ifo Schnelldienst.
ifo Publications on Tax Revenue Forecasting
Jochimsen, Beate and Robert Lehmann, "On the political economy of national tax revenue forecasts: Evidence from OECD countries", Public Choice 170 (3), 2017, 211–230, Appendix
Lehmann, Robert, "Die Steuerschätzung in Deutschland - eine Erfolgsgeschichte?", ifo Dresden berichtet 17 (03), 2010, 34–37 | PDF Download
Buettner, Thiess and Björn Kauder, "Revenue Forecasting Practices: Differences across Countries and Consequences for Forecasting Performance", CESifo Working Paper No. 2628, April 2009, Information | PDF Download
Büttner, Thiess and Ina Becker, "Are German Tax-Revenue Forecasts Flawed?", Paper presented at the annual meeting of the Verein für Socialpolitik, 2007 | PDF Download