Tax Buoyancies in Guyana

The efficiency of the tax system can be estimated by buoyancy coefficients. Understanding the nature of the taxes and whether they are regressive, progressive, or buoyant is vital for making fiscal policy. Using Error Correction Models (ECM) and data from 1990 to 2020, this chapter estimates the coefficients for short-run buoyancy, long-run buoyancy, and the speed of adjustment per tax category in Guyana. A dummy variable was included to account for discretionary changes in tax rates. Similar to the literature, the results showed that total taxes are non-buoyant in the short-run. We found taxes to be non-buoyant in the long-run. Similarly, the individual taxes assessed were also non-buoyant in both long-run and short-run, with the exception of excise tax, which is buoyant in the long-run. Although excise tax is buoyant in the long-run, its speed of adjustment is slow. Based on these findings, it is imperative that policymakers design tax policy with consideration of its responsiveness to changes in national output.