IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2017-04-55.html
   My bibliography  Save this article

The Role of Corruption Control in Moderating the Relationship Between Value Added Tax and Income Inequality

Author

Listed:
  • Mohd Zulkhairi Mustapha1

    (Department of Accounting, Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur, Malaysia,)

  • Eric H. Y. Koh

    (Department of Finance and Banking, Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur, Malaysia,)

  • Sok-Gee Chan

    (Department of Finance and Banking, Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur, Malaysia)

  • Zulkufly Ramly

    (Department of Finance, Kulliyah of Economics and Management Sciences, International Islamic University Malaysia, Kuala Lumpur, Malaysia.)

Abstract

This paper investigates the mediating role of the control of corruption on value added tax (VAT) and income inequality in the top 10 most corrupted countries. We employed quantile regression to capture the varying effects of income inequality. The results suggest that most corrupted countries with lower income inequality did not benefit from VAT, but they stand to gain if the income inequality is wide. VAT seems to improve the effectiveness of tax collection, which the government can allocate the higher tax revenues for social and economic programs to benefit poor people. Our finding also suggest the extent of control of corruption and the improved governance of tax collection via VAT in our sample that consists of countries with high level of corruption are not strong enough to reduce income inequality.

Suggested Citation

  • Mohd Zulkhairi Mustapha1 & Eric H. Y. Koh & Sok-Gee Chan & Zulkufly Ramly, 2017. "The Role of Corruption Control in Moderating the Relationship Between Value Added Tax and Income Inequality," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 459-467.
    • Handle: RePEc:eco:journ1:2017-04-55
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijefi/article/download/5124/pdf
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijefi/article/view/5124/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes, 2006. "What Mean Impacts Miss: Distributional Effects of Welfare Reform Experiments," American Economic Review, American Economic Association, vol. 96(4), pages 988-1012, September.
    2. Dobson, Stephen & Ramlogan-Dobson, Carlyn, 2012. "Why is Corruption Less Harmful to Income Inequality in Latin America?," World Development, Elsevier, vol. 40(8), pages 1534-1545.
    3. Al-Marhubi, Fahim A., 2000. "Corruption and inflation," Economics Letters, Elsevier, vol. 66(2), pages 199-202, February.
    4. Brita Bye & Birger Strøm & Turid Åvitsland, 2012. "Welfare effects of VAT reforms: a general equilibrium analysis," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(3), pages 368-392, June.
    5. A. B. Atkinson (ed.), 1991. "Modern Public Finance," Books, Edward Elgar Publishing, volume 0, number 527.
    6. Alesina, Alberto & Angeletos, George-Marios, 2005. "Corruption, inequality, and fairness," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1227-1244, October.
    7. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2007. "Distribution and development in a model of misgovernance," European Economic Review, Elsevier, vol. 51(6), pages 1534-1563, August.
    8. Denvil Duncan & Klara Sabirianova Peter, 2016. "Unequal inequalities: Do progressive taxes reduce income inequality?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(4), pages 762-783, August.
    9. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    10. Tahseen Ajaz & Eatzaz Ahmad, 2010. "The Effect of Corruption and Governance on Tax Revenues," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 405-417.
    11. Alm, James & Bahl, Roy & Murray, Matthew N, 1991. "Tax Base Erosion in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 39(4), pages 849-872, July.
    12. Adam, Antonis & Kammas, Pantelis & Lapatinas, Athanasios, 2015. "Income inequality and the tax structure: Evidence from developed and developing countries," Journal of Comparative Economics, Elsevier, vol. 43(1), pages 138-154.
    13. Reuven Avi-Yonah, 2014. "Taxation and Inequality," Challenge, Taylor & Francis Journals, vol. 57(3), pages 97-104.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dzhumashev, Ratbek, 2014. "Corruption and growth: The role of governance, public spending, and economic development," Economic Modelling, Elsevier, vol. 37(C), pages 202-215.
    2. Bienvenido Ortega & Antonio Casquero & Jesús Sanjuán, 2016. "Corruption and Convergence in Human Development: Evidence from 69 Countries During 1990–2012," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(2), pages 691-719, June.
    3. Ratbek Dzhumashev, 2014. "The Two-Way Relationship Between Government Spending And Corruption And Its Effects On Economic Growth," Contemporary Economic Policy, Western Economic Association International, vol. 32(2), pages 403-419, April.
    4. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2009. "Why is corruption less harmful in some countries than in others?," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 797-810, December.
    5. Ghulam Shabbir & Mumtaz Anwar & Shahid Adil, 2016. "Corruption, Political Stability and Economic Growth," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(4), pages 689-702.
    6. Keith Blackburn & Rashmi Sarmah, 2006. "Red Tape, Corruption and Finance," Economics Discussion Paper Series 0639, Economics, The University of Manchester.
    7. Kiyoka Akimoto, 2018. "Corruption, Mortality and Fertility Rates, and Development," Discussion Papers in Economics and Business 18-10, Osaka University, Graduate School of Economics.
    8. repec:hal:spmain:info:hdl:2441/o45fqtltm960r11iq437ski90 is not listed on IDEAS
    9. Bo Rothstein, 2011. "Can markets be expected to prevent themselves from self‐destruction?," Regulation & Governance, John Wiley & Sons, vol. 5(4), pages 387-404, December.
    10. Soeren C. Schwuchow, 2023. "Organized crime as a link between inequality and corruption," European Journal of Law and Economics, Springer, vol. 55(3), pages 469-509, June.
    11. Keith Blackburn & Gonzalo F. Forgues-Puccio, 2011. "Foreign aid - a fillip for development or a fuel for corruption?," Centre for Growth and Business Cycle Research Discussion Paper Series 158, Economics, The University of Manchester.
    12. Kouramoudou Kéïta & Hannu Laurila, 2021. "Corruption and Tax Burden: What Is the Joint Effect on Total Factor Productivity?," Economies, MDPI, vol. 9(1), pages 1-16, March.
    13. Per Fredriksson & Daniel Millimet, 2007. "Legislative Organization and Pollution Taxation," Public Choice, Springer, vol. 131(1), pages 217-242, April.
    14. Lee, Chien-Chiang & Yuan, Zihao & Ho, Shan-Ju, 2022. "How does export diversification affect income inequality? International evidence," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 410-421.
    15. Keith Blackburn & Niloy Bosey & Salvatore Capasso, 2008. "Living With Corruption: Threshold Effects in Red Tape and Rent Seeking," Working Papers 4_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    16. Shuanglin Lin & Wei Zhang, 2009. "The effect of corruption on capital accumulation," Journal of Economics, Springer, vol. 97(1), pages 67-93, May.
    17. Meixing Dai & Moïse Sidiropoulos & Eleftherios Spyromitros, 2015. "Fiscal Policy, Institutional Quality and Central Bank Transparency," Manchester School, University of Manchester, vol. 83(5), pages 523-545, September.
    18. José Alves & António Afonso, 2019. "Tax structure for consumption and income inequality: an empirical assessment," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(3), pages 337-364, November.
    19. Ratbek, Ratbek, 2010. "Nonlinear effect of corruption, uncertainty, and growth," MPRA Paper 24834, University Library of Munich, Germany.
    20. Theo Eicher & Cecilia García-Peñalosa & Tanguy Ypersele, 2009. "Education, corruption, and the distribution of income," Journal of Economic Growth, Springer, vol. 14(3), pages 205-231, September.
    21. Antonio N. Bojanic & LaPorchia A. Collins, 2021. "Differential effects of decentralization on income inequality: evidence from developed and developing countries," Empirical Economics, Springer, vol. 60(4), pages 1969-2004, April.

    More about this item

    Keywords

    Income Inequality; Corruption; Value Added Tax;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2017-04-55. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.