The Study of Municipal Government Revenue Forecasts in Taiwan
Date Issued
2015
Date
2015
Author(s)
Chen, Szu-Yin
Abstract
Under dramatic fiscal pressure, the municipal governments in Taiwan have been facing severely fiscal crisis. It indicates the importance of revenue forecast in municipal governments. This study examines the results of revenue forecasting of 25 municipal governments in Taiwan from the year 1951 to 2010 through literature analysis and quantitative analysis. The research firstly uses Mean Absolute Percentage Error (MAPE) and Mean Percentage Error (MPE) to present the accuracy and bias of revenue forecast errors, then applys panel data model to analyze the impact factors behind. This study finds out that, first, during the period from 1951 to 2010, estimates of tax recipients were the most accurate item among all different revenue. Estimates of property revenue and the item other revenue were the least accurate. According to historical data, Yunlin County had the most inaccurate estimation of property revenue, but in other revenue items it performed the most accurate estimation among all the municipal government. Hualien County, Kaohsiung City and Lianjiang County displayed good performance as well. Second, in the section of assessing the degree of bias, municipal governments tended to underestimate total revenue in the early years. After 1990, municipal governments appear to overestimate total revenue gradually. Tax recipients, fines and compensation revenue and fee revenue have the tendency to be underestimated. On the other hand, property revenue tends to be overestimated and displays the highest degree of bias. In recent years, grants and assistance revenue has been overestimated significantly, and it seems to be an alert of abnormal condition. There are plenty of factors influencing revenue forecast error. The deferred effect of the forecast error in previous year is the most significant. If previous year’s error arises, the inaccuracy and bias of forecast error will then increase. In the accuracy model, total revenue, fines and compensation revenue, and fee revenue were influenced by time. Tax recipients, fines and compensation revenue, and property revenue were significant in the variable of economic growth rate estimation error, reflected that they were also influenced by changes in the economic environment. The dummy variable of municipality was insignificant in all the dependent variable. In the bias model, tax recipients, fines and compensation revenue, property revenue, and grants revenue were influenced by the variable of economic growth rate estimation error. Besides, this study uses counties deficit per capita as the representative of financial pressure. The result shows that deficit per capita was significant in total revenue, fines and compensation revenue, fee revenue, and grants revenue. The dummy variable of municipality was significant in grants revenue and municipalities. For example, Taipei City and Kaohsiung City tend to underestimate it. Elections are prone to affect the forecasting of tax recipients. In the circumstance of uncertainty and risks, every forecast activity would be accompanied with forecast error which has asymmetric cost. Under financial pressure, forecasters must measure the ability of risk-taking to make decisions. The responsible authority should face the restrictions on forecasting behavior, encourage municipal governments to disclosure information, and perform a relatively reasonable estimation.
Subjects
Municipal finance
Revenue forecasting
Budget forecasting
Forecast error
SDGs
Type
thesis
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