Forecasting Moroccan Tax Revenues: An Analysis Using International Institutions Methodologies and VECM

Abstract

The forecast of tax revenues is based on several methodologies. The literature review of empirical studies has concluded that the main ones are; the effective tax rate approach, the marginal tax rate approach, the elasticity approach, the regression approach and the analysis of co-integration. These approaches are advocated by International institutions, especially the International Monetary Fund (IMF) in its technical assistance of developing countries and its trainings to officials. Thereby, this paper aims to examine these different approaches, to apply them on Moroccan data and to compare their results in order to improve the forecasting system of Moroccan tax revenues. It turns out that the forecast of government revenue is a tough task that relies on the perfect knowledge of the predictable variables context and the awareness of the various external factors that can influence the future achievements. Moreover, regular comparisons of the forecasts and the revenue recorded are found to be fundamental to assess the quality of the estimates in order to increase the accuracy of predictions.