Built-in flexibility of Irish taxes

Abstract

In this article we develop a small model of the Irish economy with a view to obtaining measurements of the built-in flexibility of the prevailing tax structure in Ireland. By the built-in flexibility of a tax/expenditure, or its sensitivity, is meant the tendency of that revenue (expenditure) to vary in the same (opposite) direction as its base, or a policy variable which it is desired to stabilise - usually output. The sectors of the economy studied and the relationships developed are discussed below.