Tax Policy Relationship with the Business Cycle in Romania

Tax policy has significant effects on the economy. There are little known facts about the cyclical behavior of tax policy (namely the tax rates). Based on a dataset on tax rates for Romania, for the period 1991-2015, that comprises corporate income, personal income, and value added tax rates, the paper tries to identify the features of the tax policy, and how it is conducted over the business cycle. The empirical evidence of the paper is largely inconsistent with the standard Keynesian recommendations.