Reducing Taxes in Slovakia
| Authors | |
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| Year of publication | 2017 |
| Type | Article in Proceedings |
| Conference | Proceedings of the 7th EACO International Scientific Conference |
| MU Faculty or unit | |
| Citation | |
| Keywords | tax reduction; Slovakia; DSGE; labour; capital |
| Description | The Slovak government has to cope with the consequences of the global financial crisis. In addition aging population brings down the working population and predicts an increase in spending on the social and health system. Consolidation of the public sector is therefore a key task for the government and politicians. This paper examines the effects of negative shock into the labour and capital income tax for Slovakia in 2014 using simple DSGE model of small and closed economy with 3 sectors. Stochastic analysis confirms the overall positive effects of decreasing direct taxes. It is shown that economy is more sensitive to the shocks on labour than on capital income taxes. Results are in line with expectations and theory and we can see that consumption and investments react in opposite way. |
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