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Performance of tax simplification around the world: A panel frontier analysis

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  • Nguyen, Trang Thi Thuy
  • Pham, Binh Thai
  • Prior, Diego
  • van Hemmen, Stefan

Abstract

A complex tax system may affect the ease of doing business in a specific country through rising fixed cost and the opportunity cost of taxpayers' time, thus constituting a barrier to foreign direct investment and entrepreneurship. This study observes the tax competitiveness in its tax complexity dimension, by covering 88 countries over timespan 2005–2016 and proposing the panel data nonparametric frontier method [1,2] for the model without explicit output (hereafter, panel data DEA-WEO). A thorough view on tax simplification performance was conducted by measuring the efficiency (both contemporaneous and long-run analysis), which allows producing a ranking, and examining the productivity change of these tax systems. Findings show the uptrend of tax systems' relative efficiency through years, from 31.2% (2005) to 52.6% (2016), along with an increasing convergence of the tax simplification trend. Switzerland was found to be the most efficient country, considering long-run performance; however, Norway appeared to have the most feasible practice and model in the segment. It was also found that the average productivity progress of tax simplification for both periods, 2006–2011 and 2011–2016, was 27.7% and 19.6%, respectively. The robustness analysis finds the positive impact of some macro environment-related factors on tax simplification performance, consolidating and validating the tax competitiveness insight of these tax systems.

Suggested Citation

  • Nguyen, Trang Thi Thuy & Pham, Binh Thai & Prior, Diego & van Hemmen, Stefan, 2022. "Performance of tax simplification around the world: A panel frontier analysis," Socio-Economic Planning Sciences, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:soceps:v:80:y:2022:i:c:s0038012121001464
    DOI: 10.1016/j.seps.2021.101154
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    More about this item

    Keywords

    Tax complexity; Tax simplification; Panel data DEA; DEA-WEO; Tax competitiveness; OECD;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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