The ways of modelling and forecasting of profit tax revenue in Lithuania

Abstract

The indicator of quarterly profit tax revenue in Lithuania is unlikely to meet the] assumption of stationarity, for many profit tax-related legislative changes have beent made. It forces to search for the unusual ways of profit tax revenue modelling. In' many cases, elements of legitimate order are not included in the tax revenue models, 5 such as elasticity models, extrapolation models, and regression of economic indicators. | The ideas which are met in both macroeconomic and microsimulation models where | elements of taxation order are applied to the profit indicator used as a profit tax base | for profit tax revenue estimation could be applied to time series modelling. The aim of the presentation is to introduce the way of profit tax revenue modelling and forecasting when the changes of legitimate order are considered in time series of Lithuanian profit tax revenue modelling. The profit tax revenue modelling in two stages are presented here. At the first stage, an indicator of the profit is suggested to be modelled and fore¬casted using a linear regression of economic indicators. At the second stage, a function of profit tax revenue in Lithuania, depending on the profit indicator and other different legitimate elements of profit tax is found.