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Tax Effort in Developing Countries and High Income Countries: The Impact of Corruption, Voice and Accountability

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Author Info

  • Bird, Richard M.

    ()
    (University of Toronto (Canada))

  • Martinez-Vazquez, Jorge

    ()
    (Georgia State University, Atlanta (USA))

  • Torgler, Benno

    ()
    (Queensland University of Technology, Brisbane (Australia))

Abstract

In this paper we argue that a more legitimate and responsive state is an essential factor for a more adequate level of tax effort in developing countries and high income countries. While at first glance giving such advice to poor countries seeking to increase their tax ratios may not seem more helpful than telling them to find oil, it is presumably more feasible for people to improve their governing institutions than to rearrange nature’s bounty. Improving corruption, voice and accountability may not take longer nor be necessarily more difficult than changing the opportunities for tax handles and economic structure. The paper also shows that high income countries have also the potential of improving their tax performance through improving their institutions. The key contribution of this paper is to extend the conventional model of tax effort by showing that not only do supply factors matter, but that demand factors such as corruption, voice and accountability also determine tax effort to a significant extent.

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Bibliographic Info

Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

Volume (Year): 38 (2008)
Issue (Month): 1 (March)
Pages: 55-71

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Handle: RePEc:eap:articl:v:38:y:2008:i:1:p:55-71

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Related research

Keywords: Tax effort; tax reforms; developing countries; Latin America; corruption; voice and accountability;

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References

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  1. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2004. "Societal Institutions and Tax Effort in Developing Countries," International Tax Program Papers 0411, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  2. Benno Torgler & Friedrich Schneider, 2007. "Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis," CREMA Working Paper Series 2007-02, Center for Research in Economics, Management and the Arts (CREMA).
  3. Chen, Martha Alter, 2005. "Rethinking the Informal Economy: Linkages with the Formal Economy and the Formal Regulatory Environment," Working Paper Series RP2005/10, World Institute for Development Economic Research (UNU-WIDER).
  4. Peter H. Lindert, 2003. "Why the Welfare State Looks Like a Free Lunch," NBER Working Papers 9869, National Bureau of Economic Research, Inc.
  5. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2002. "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development," NBER Working Papers 9305, National Bureau of Economic Research, Inc.
  6. Alberto Alesina & Arnaud Devleeschauwer & William Easterly & Sergio Kurlat & Romain Wacziarg, 2003. "Fractionalization," NBER Working Papers 9411, National Bureau of Economic Research, Inc.
  7. Torgler, Benno, 2005. "Tax morale and direct democracy," European Journal of Political Economy, Elsevier, vol. 21(2), pages 525-531, June.
  8. Andrei Shleifer & Robert W. Vishny, 1998. "The Quality of Government," Harvard Institute of Economic Research Working Papers 1847, Harvard - Institute of Economic Research.
  9. Raja J. Chelliah, 1971. "Trends in Taxation in Developing Countries (Les tendances de la fiscalité dans les pays en voie de développement) (Tendencias tributarias en los países en desarrollo)," IMF Staff Papers, Palgrave Macmillan, vol. 18(2), pages 254-331, July.
  10. Hettich,Walter & Winer,Stanley L., 2005. "Democratic Choice and Taxation," Cambridge Books, Cambridge University Press, number 9780521021807, October.
  11. Alm, James & Torgler, Benno, 2006. "Culture differences and tax morale in the United States and in Europe," Journal of Economic Psychology, Elsevier, vol. 27(2), pages 224-246, April.
  12. Djankov, Simeon & La Porta, Rafael & López-de-Silanes, Florencio & Shleifer, Andrei, 2001. "The Regulation of Entry," CEPR Discussion Papers 2953, C.E.P.R. Discussion Papers.
  13. Lars P. Feld & Bruno S. Frey, 2000. "Trust Breeds Trust: How Taxpayers are Treated," CESifo Working Paper Series 322, CESifo Group Munich.
  14. Messere, Ken & de Kam, Flip & Heady, Christopher, 2003. "Tax Policy: Theory and Practice in OECD Countries," OUP Catalogue, Oxford University Press, number 9780199241484.
  15. Peter Lindert, 2003. "Voice and Growth: Was Churchill Right?," Working Papers 26, University of California, Davis, Department of Economics.
  16. Peter Lindert, 2004. "Social Spending and Economic Growth," Challenge, M.E. Sharpe, Inc., vol. 47(4), pages 6-16, July.
  17. Richard M. bird, 2003. "Taxation in Latin America: Reflections on Sustainability and the Balance between Equity and Efficiency," International Tax Program Papers 0306, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  18. Jorge Martinez-Vazquez, 2001. "Mexico: An Evaluation of the Main Features of the Tax System," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0112, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  19. Richard M. Bird, 2014. "Administrative Dimensions of Tax Reform," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 963-992, November.
  20. Best, Michael H., 1976. "Political power and tax revenues in Central America," Journal of Development Economics, Elsevier, vol. 3(1), pages 49-82, March.
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