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Tax structures in developing countries: Many puzzles and a possible explanation

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Author Info
Gordon, Roger
Li, Wei

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Abstract

Tax policies seen in developing countries are puzzling on many dimensions, given the sharp contrast between these policies and both those seen in developed countries and those forecast in the optimal tax literature. In this paper, we explore how forecasted policies change if firms can successfully evade taxes by conducting all business in cash, thereby avoiding any use of the financial sector. The forecasted policies are now much closer to those observed.

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Publisher Info
Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 7-8 (August)
Pages: 855-866
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Handle: RePEc:eee:pubeco:v:93:y:2009:i:7-8:p:855-866

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Web page: http://www.elsevier.com/locate/inca/505578

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Related research
Keywords: Tax policy in developing countries Informal economy Inflation Tariffs Red tape Capital taxes Corruption;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Berkowitz, Daniel & Li, Wei, 2000. "Tax rights in transition economies: a tragedy of the commons?," Journal of Public Economics, Elsevier, vol. 76(3), pages 369-397, June. [Downloadable!] (restricted)
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    Other versions:
  6. Hatta, Tatsuo, 1986. "Welfare effects of changing commodity tax rates toward uniformity," Journal of Public Economics, Elsevier, vol. 29(1), pages 99-112, February. [Downloadable!] (restricted)
  7. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Marta Campillo & Jeffrey A. Miron, 1996. "Why Does Inflation Differ Across Countries?," NBER Working Papers 5540, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
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  11. Roger Gordon & Laura Kalambokidis & Joel Slemrod, 2003. "A New Summary Measure of the Effective Tax Rate on Investment," NBER Working Papers 9535, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Martin S. Feldstein, 1997. "The Costs and Benefits of Going from Low Inflation to Price Stability," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 123-166 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  13. Gordon, Roger H. & Bai, Chong-En & Li, David D., 1999. "Efficiency losses from tax distortions vs. government control," European Economic Review, Elsevier, vol. 43(4-6), pages 1095-1103, April. [Downloadable!] (restricted)
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    Other versions:
  16. Friedrich Schneider & Dominik H. Enste, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March. [Downloadable!] (restricted)
  17. Harry Grubert & Timothy Goodspeed & Deborah L. Swenson, 1993. "Explaining the Low Taxable Income of Foreign-Controlled Companies in the United States," NBER Chapters, in: Studies in International Taxation, pages 237-276 National Bureau of Economic Research, Inc. [Downloadable!]
  18. Gordon, R.H. & Levisohn, J., 1989. "The Linkage Between Domestic Taxes And Borber Taxes," Working Papers 244, Research Seminar in International Economics, University of Michigan.
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Raj Chetty & Adam Looney, 2005. "Income Risk and the Benefits of Social Insurance: Evidence from Indonesia and the United States," NBER Working Papers 11708, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. M.Govinda Rao, 2005. "Trends and Issues in Tax Policy and Reform in India," Working Papers id:243, esocialsciences.com. [Downloadable!]
  3. Shlomo Yitzhaki, 2007. "Cost Benefit Analysis of Presumptive Taxation," International Studies Program Working Paper Series, at AYSPS, GSU paper0714, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
    Other versions:
  4. Claus Thustrup Kreiner & Nicolaj Verdelin, 2009. "Optimal Provision of Public Goods: A Synthesis," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. Eduardo Lora & Mauricio Cardenas, 2006. "La reforma de las instituciones fiscales en América Latina," RES Working Papers 4458, Inter-American Development Bank, Research Department. [Downloadable!]
  6. Knud Jørgen Munk, 2005. "Tax-tariff reform with costs of tax administration," Economics Working Papers 2005-21, School of Economics and Management, University of Aarhus. [Downloadable!]
    Other versions:
  7. Joshua Aizenman & Kenneth Kletzer & Brian Pinto, 2007. "Economic Growth with Constraints on Tax Revenues and Public Debt: Implications for Fiscal Policy and Cross-Country Differences," NBER Working Papers 12750, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Bird, Richard M., 2008. "Tax challenges facing developing countries," Working Papers 08/als1, National Institute of Public Finance and Policy. [Downloadable!]
    Other versions:
  9. Roger Gordon & Wei Li, 2005. "Puzzling Tax Structures in Developing Countries: A Comparison of Two Alternative Explanations," NBER Working Papers 11661, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Rao, M. Govinda & Rao, R. Kavita, 2005. "Trends and issues in tax policy and reform in India," Working Papers tru1, National Institute of Public Finance and Policy. [Downloadable!]
  11. Alberto Chong & Mark Gradstein, 2007. "Desigualdad, Democracia, Calidad Institucional y Redistribucion Fiscal," RES Working Papers 4548, Inter-American Development Bank, Research Department. [Downloadable!]
  12. Debasis Bandyopadhyay & Xueli Tang, 2009. "Inequality may retard growth but sometimes progressive redistribution makes it worse," Economics Series 2009_15, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
  13. Simón Cueva, 2008. "Ecuador: Fiscal Stabilization Funds and Prospects," RES Working Papers 2004, Inter-American Development Bank, Research Department. [Downloadable!]
  14. Michael Keen, 2007. "VAT, Tariffs, and Withholding: Border Taxes and Informality in Developing Countries," IMF Working Papers 07/174, International Monetary Fund. [Downloadable!]
    Other versions:
  15. Pierre-Richard Agénor & Kyriakos C. Neanidis, 2007. "Optimal Taxation and Growth with Public Goods and Costly Enforcement," Centre for Growth and Business Cycle Research Discussion Paper Series 89, Economics, The Univeristy of Manchester. [Downloadable!]
  16. Mauricio Cardenas & Carolina Mejía & Mauricio Olivera, 2007. "La economía política del proceso presupuestal: El caso de Colombia," RES Working Papers 2003, Inter-American Development Bank, Research Department. [Downloadable!]
  17. Richard M. Bird, 2008. "The BBLR Approach to tax Reform in Emerging Countries," International Studies Program Working Paper Series, at AYSPS, GSU paper0804, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
  18. Junko Koeda & Era Dabla-Norris, 2008. "Informality and Bank Credit: Evidence from Firm-Level Data," IMF Working Papers 08/94, International Monetary Fund. [Downloadable!]
  19. Lin, Justin Yifu & Liu, Mingxing & Pan, Shiyuan & Zhang, Pengfei, 2006. "Development Strategy, Viability, and Economic Institutions: The Case of China," Working Papers RP2006/48, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  20. Joshua Aizenman & Yothin Jinjarak, 2005. "The Collection Efficiency of the Value Added Tax: Theory and International Evidence," NBER Working Papers 11539, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  21. Eduardo Lora & Mauricio Cardenas, 2006. "The Reform of Fiscal Institutions in Latin America," RES Working Papers 4457, Inter-American Development Bank, Research Department. [Downloadable!]
  22. Alberto Chong & Mark Gradstein, 2007. "Inequality, Democracy, Institutional Quality, and Fiscal Redistribution," RES Working Papers 4547, Inter-American Development Bank, Research Department. [Downloadable!]
  23. Peter Rangazas & Alex Mourmouras, 2008. "Fiscal Policy and Economic Development," IMF Working Papers 08/155, International Monetary Fund. [Downloadable!]
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