Explaining Total Revenue in terms of CapEx, Current Expenditure and VAT; Albanian Case

Abstract

Total Revenue is an important indicator of the economic well being of a particular country. As it is known government has revenue either by the taxes it collects from society or by the investments it undertakes. This paper is interested in studying the total revenue component for government and some of the factors that affect it. The factors chosen in this paper are capital expenditure, current expenditure and VAT (value added tax). The factors chosen here are a combination of investment from government (including capital and current expenditure) and tax collection (including VAT), which as stated before are the most important components for a governments total revenue. This paper is especially interested in the Albanian case and the interrelation among the total revenue and the other three factors based on time series econometric model. As a consequence it will be based more on econometrics, but without leaving behind the economic interpretation of the results. It will be important to measure whether these factors have a positive or negative impact in the total revenue; whether their impact is statistically significant or not and whether they are sufficient indicators to determine the actual values of total revenue. After taking into consideration all these econometric factors, an economic analysis will be applied; by comparing the expectation the economic theory has and the actual results of the econometric model, and by this way will be determined the validity of the model.