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Revenue Forecasting

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									Revenue Forecasting



          Estimating & Tax
          Expenditure Budgets
Revenue Forecasts

qA.K.A. baselines
qUsed to forecast revenue collections in a
 fiscal year (or other budget period)
qAssume no changes in tax policies




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Considerations

qPrecision/accuracy
qConservatism
qGeneralizability
qEase of computation




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Considerations, cont.

qTime frame (short-term projections are
 more likely to be accurate, long term
 projections require simpler methods due
 to the imprecision inherent in them)
qTenable assumptions




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Methods: Projections &
Extrapolations

qA.K.A. “deterministic models”
qExamples
  § Moving averages
  § Simple regression (with time as independent
    variable)




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Methods: Multiple Regression

qAssume that revenue is a function of the
 independent variables
qSelection of independent variables is
 important




                                            6
Other Methods

qEconometric models
qSimulations




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Estimating

qPredicts the effects of changes in tax laws
 &/or tax administration procedures
qMethods differ in terms of assumptions re.
 changes in taxpayer, etc. behavior as a
 result of the new laws
  § Static
  § Dynamic


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Tax Expenditure Budgeting

qCalculates revenue losses due to policy
 decisions re. deductions, exemptions,
 abatements, etc.
q“Benchmark” budget is what revenues
 would be without policy-based erosion




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