The relationship between excise taxes revenues and budget deficit in oecd countries: 1999-2016

Abstract

The aim of this study is to examine the relationship between budget deficits and excise taxes revenues in OECD countries for 1999-2016 period. In the study, the bootstrap panel causality technique proposed by Kónya (2006), which considers cross-sectional dependence and heterogeneity across the countries was performed for 32 OECD member countries (Chile, Japan, Lithuania and Mexico are not included due to lack of data) yearly data of the 1999-2016 period. According to the results of the bootstrap panel causality, a significant relationship between excise tax revenue and budget deficit in OECD member countries exists. Governments due to its ease of application and general acceptance prefer excise taxes. Thus, the results can be interpreted that excise taxes are used as a revenue-increasing resource to decrease the budget deficit or to prevent increase in the budget deficit.