Tax buoyancy in the Caribbean : evidence from heterogenous panel cointegration models

This paper provides long- and short-run tax buoyancy estimates for a group of 12 Caribbean countries over the period 1991-2017. Using panel regressions , the study found that the long- and short-run tax buoyancy estimates are statistically greater than one. However, the results vary by tax categories: with respect to indirect taxes, which accounts for almost 65 percent of total tax revenues, the buoyancy of the long-run coefficient is significantly less than 1 (0.35), while for direct taxes it is significantly greater than 1 (1.33). It also found that long-run tax buoyancy was lower in the post global financial crisis period. With respect to short-run buoyancy, corporate taxes and trade taxes are the most buoyant , while property taxes were found to be statistically insignificant. For taxes on goods on services, the single most important tax for most countries, both long- and short-run buoyancy is not significantly different from 1 .