Are German Tax-Revenue Forecasts Flawed?

This paper provides an empirical assessment of tax-revenue forecasting in Germany. Following the literature on rational forecasting, an empirical analysis of the forecasts from 1971 until today explores unbiasedness and e±ciency of the forecasts. The results point at unbiased and generally e±cient tax-revenue forecasts in Germany. A substantial part of the forecast errors can be attributed to uncertainty about the growth rate. However, deviations between the government's growth forecasts and the forecasts of the independent research institutes do not show significant effects. Only with regard to the electoral cycle the results indicate the existence of some possible improvement.