Measuring tax effort: Does the estimation approach matter and should effort be linked to expenditure goals?
AbstractIn this paper we attempt to take a fresh look at the classical question of the determinants of tax effort. Our goal is to better understand the fundamental economic logic of the different approaches that have been used in the previous literature, consider alternative measurements which may provide a more direct intuition of what the concept of tax effort attempts to measure, and to compare quantitatively the rankings of tax effort produced by all these different approaches. As we see it, the fundamental issue is how to move forward toward a definition of tax effort that has a higher relevance to the developmental needs and budgetary ambitions of a country and as an indicator of potential tax reform needs. Fundamentally, all tax effort indicators are calculated by comparing actual collection performance against a measure of potential collections. This definitional choice lays out several dimensions for the conduct of tax policy in a country. These include the need for reform to raise revenues with reference to some potential, the desirable timing and urgency of those reforms, and the extent of the gains in national welfare that are achievable with these reforms. While the first two dimensions have been examined in different ways in the previous literature, in this paper, for the first time in this literature, we will examine how much the two different approaches to estimation of tax effort matter as compared to those conventionally used. In addition, and also for the first time in this literature, in this paper we argue for the need to explicitly link the adequacy of tax effort with the specific expenditure goals of government and their associated gains in national welfare.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper1308.
Length: 44 pages
Date of creation: 07 Apr 2013
Date of revision:
Contact details of provider:
Web page: http://aysps.gsu.edu/isp/index.html
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-24 (All new papers)
- NEP-IUE-2013-05-24 (Informal & Underground Economics)
- NEP-PBE-2013-05-24 (Public Economics)
- NEP-PUB-2013-05-24 (Public Finance)
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.:
- Bird, Richard, 2010.
"Taxation and Development,"
World Bank - Economic Premise,
The World Bank, issue 34, pages 1-5, September.
- Ilja Neustadt & Peter Zweifel, 2010.
"Is the Welfare State Sustainable? Experimental Evidence on Citizens’ Preferences for Redistribution,"
1003, University of Zurich, Socioeconomic Institute.
- Neustadt, Ilja & Zweifel, Peter, 2010. "Is the Welfare State Sustainable? Experimental Evidence on Citizens' Preferences for Redistribution," MPRA Paper 22233, University Library of Munich, Germany.
- Ilja Neustadt & Peter Zweifel, 2010. "Is the Welfare State Sustainable? Experimental Evidence on Citizens' Preferences for Redistribution," CESifo Working Paper Series 3148, CESifo Group Munich.
- Susana Franco-Rodriguez, 2000. "Recent developments in fiscal response with an application to Costa Rica," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 429-441.
- Guglielmo Barone & Sauro Mocetti, 2011.
"Tax morale and public spending inefficiency,"
International Tax and Public Finance,
Springer, vol. 18(6), pages 724-749, December.
- Mahdavi, Saeid, 2008. "The level and composition of tax revenue in developing countries: Evidence from unbalanced panel data," International Review of Economics & Finance, Elsevier, vol. 17(4), pages 607-617, October.
- Cukierman, Alex & Edwards, Sebastian & Tabellini, Guido, 1992.
"Seigniorage and Political Instability,"
American Economic Review,
American Economic Association, vol. 82(3), pages 537-55, June.
- Christopher Heady & Åsa Johansson & Jens Arnold & Bert Brys & Laura Vartia, 2009.
"Tax Policy for Economic Recovery and Growth,"
Studies in Economics
0925, Department of Economics, University of Kent.
- Roy W. Bahl & Richard M. Bird, 2008.
"Tax Policy in Developing Countries: Looking Back and Forward,"
Working Papers Series
13, Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto, revised May 2008.
- Bahl, Roy W. & Bird, Richard M., 2008. "Tax Policy in Developing Countries: Looking Back—and Forward," National Tax Journal, National Tax Association, vol. 61(2), pages 279-301, June Cita.
- Konrad, Kai A. & Qari, Salmai, 2009.
"The Last Refuge of a Scoundrel? Patriotism and Tax Compliance,"
IZA Discussion Papers
4121, Institute for the Study of Labor (IZA).
- Kai A. Konrad & Salmai Qari, 2012. "The Last Refuge of a Scoundrel? Patriotism and Tax Compliance," Economica, London School of Economics and Political Science, vol. 79(315), pages 516-533, 07.
- Konrad, Kai A. & Qari, Salmai, 2009. "The last refuge of a scoundrel? Patriotism and tax compliance," Discussion Papers, Research Unit: Market Processes and Governance SP II 2009-04, Social Science Research Center Berlin (WZB).
- Konrad, Kai A. & Qari, Salmai, 2009. "The Last Refuge of a Scoundrel? Patriotism and Tax Compliance," CEPR Discussion Papers 7215, C.E.P.R. Discussion Papers.
- Lotz, Joergen R & Morss, Elliott R, 1970. "A Theory of Tax Level Determinants for Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 18(3), pages 328-41, April.
- Michael Keen & Mario Mansour, 2010. "Revenue Mobilisation in Sub-Saharan Africa: Challenges from Globalisation I - Trade Reform," Development Policy Review, Overseas Development Institute, vol. 28(5), pages 553-571, 09.
- Francesco Grigoli Author-Email: email@example.com Author-Name: Eduardo Ley Author-Email: firstname.lastname@example.org, 2012. "Quality of Government and Living Standards," World Bank - Economic Premise, The World Bank, issue 89, pages 1-6, September.
- Carola Pessino & Ricardo Fenochietto, 2010. "Determining countries’ tax effort," Hacienda Pública Española, IEF, vol. 195(4), pages 65-87, december.
- Léonce Ndikumana & Abderrahim, Kaouther, 2010. "Revenue Mobilization in African Countries: Does Natural Resource Endowment Matter?," African Development Review, African Development Bank, vol. 22(3), pages 351-366.
- Mkandawire, Thandika, 2010.
"On Tax Efforts and Colonial Heritage in Africa,"
2010:10, Institute for Futures Studies.
- Barro, Robert J., 1974.
"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- Mauricio Cárdenas & Didem Tuzemen, 2011. "Under-investment in state capacity: the role of inequality and political instability," Research Working Paper RWP 11-07, Federal Reserve Bank of Kansas City.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Benson).
If references are entirely missing, you can add them using this form.