The effect of tax revenue budgeting errors on fiscal balance: evidence from the Swiss cantons

This study is an empirical analysis of the impact of direct tax revenue budgeting errors on fiscal deficits. Using panel data from 26 Swiss cantons between 1980 and 2002, we estimate a single equation model on the fiscal balance, as well as a simultaneous equation model on revenue and expenditure. We use new data on budgeted and actual tax revenue to show that underestimating tax revenue significantly reduces fiscal deficits. Furthermore, we show that this effect is channeled through decreased expenditure. The effects of over and underestimation turn out to be symmetri

Incentive Effects of Fiscal Rules on the Finance Minister’s Behaviour: Evidence from Revenue Projections in Swiss Cantons

Predicting available tax revenue accurately is a key step of scal policy. It has recently been shown that revenue prediction errors have a direct impact on scal decits. In the current paper we explore the relationship between the ideology of the nance minister and tax revenue projection errors and assess how the stringency of scal rules does alter this relationship. We use a panel dataset on 26 Swiss cantons over the period 1980-2007 as well as a new dataset on 99 nance ministers at the cantonal level. We nd a rather counter-intuitive positive relationship between the ideology of the nance minister and tax revenue projection errors in the sense that a more left wing nance minister produces relatively more conservative forecasts. We also nd that scal rules reduce the eect of ideology on tax revenue projection errors. These results suggest that left wing nance ministers need to curb decits relatively more in order to signal the same level of competence than a right wing nance minister to the voters. It also suggests that scal rules render the signal less informative to the voters and thereby reduce the incentive for left wing nance ministers to be more conservative in their projections

Évaluation empirique du frein à l’endettement neuchâtelois

Cet article présente une analyse empirique du dispositif de frein à l’endettement dans le canton de Neuchâtel. L’évaluation du frein à l’endettement a montré que ce dispositif a permis de réduire l’endettement du canton. L’analyse a également mis en évidence un comportement pro- cyclique de l’investissement mais ne permet pas de l’attribuer au frein à l’endettement. L’analyse tend même à montrer qu’il a contribué à réduire l’évolution pro-cyclique de l’investissement. De même, il ne semble pas que le solde du compte de fonctionnement ait transmis les variations conjoncturelles à l’investissement public durant la période analysée. Il convient toutefois de noter que le risque d’observer un tel mécanisme de transmission des variations conjoncturelles à l’investissement dans le futur n’est pas à exclure, en raison notamment du lien existant entre le taux d’endettement net et le degré minimal d’autofinancement.This contribution empirically analyses the debt brake regulation in the Swiss canton of Neuchâtel. The assessment of the debt brake shows that it induced a reduction in the cantonal public debt. The analysis also establishes a pro-cyclical behavior of public investment but this behavior cannot be imputed to the introduction of the debt brake. On the contrary, our analysis suggests that the debt brake contributed to reduce the pro-cyclical movements of public investment. Furthermore, we do not find any evidence that the operating fiscal balance has acted as a transmission channel of business cycles to investment expenditure over the examined period. Nevertheless, a risk exists to observe such a mechanism transmitting business cycles fluctuations to public investment in the future since a link between the net debt ratio and the minimal degree of self-financed investments exists.ISSN:1662-351