Rationality and efficiency of the tax revenue forcasts in Ukraine

Dedusheva Marina
graduate student, department of finance, E-mail:dedushm@gmail.com

Cite this article:

Dedusheva M., (2015) Rationality and efficiency of the tax revenue forcasts in Ukraine. Ed.: М.D. Baldzhy (ed.-in-ch.) and others [Systema pensiinoho zabezpechennia Ukrainy ta yevrointehratsiini protsesy; za red.: М. D. Baldzhy (gol. red.)], Scientific Bulletin of the Odessa National Economic University (ISSN 2313-4569), Odessa National Economics University, Odessa, No. 10(230), pp. 76-95.

Abstract

The article is an overview of the conceptual approaches to understanding such notions as «rationality» and «efficiency» of the forecast. We consider advanced methods of evaluating the effectiveness of forecast based on the theory of rational expectations, by building the regression error, and through the usage of the loss function. Statistical analysis of the tax revenue forecast in Ukraine in period indicates that the projections of Cabinet of Ministers of Ukraine were more frequently deviated than consensus forecasts published by the Ministry of Economic Development and Trade. Results of regression analysis also had shown that in both cases the budget revenues are offset and ineffective. However, the probability of unbiasedness of the forecasts prepared by Ministry of Economic Development and Trade was much higher, comparing to the Cabinet of Ministers of Ukraine. On the average forecasts of Cabinet of Ministers always were overestimated. Such «positive bias» is inherent for the government with a low level of political and fiscal responsibility. They are caused by two reasons: (i) political opportunism, optimistic forecasts are perceived by voters as indicator of quality work of the government and political forces, and (ii) overestimated revenues allows justify increased budget expenditures. At the same time, projections of the Ministry of Economic Development and Trade of Ukraine were also biased and inefficient; however their irrationality was less obvious and very difficult to say whether these forecasts were over or underestimated, as forecasts deviated equally in both directions and the average error was annihilated to zero.

Keywords

budget forecasting, bias in revenue forecast, rationality and efficiency of estimation, loss function, forecast error.

JEL classification: Е47

UD classification: 336.144.36

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