Advanced Search
MyIDEAS: Login to save this paper or follow this series

Measuring tax effort: Does the estimation approach matter and should effort be linked to expenditure goals?

Contents:

Author Info

Abstract

In 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 Info

If 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.
File URL: http://icepp.gsu.edu/sites/default/files/documents/icepp/wp/ispwp1308.pdf
Download Restriction: no

Bibliographic Info

Paper 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.

as in new window
Length: 44 pages
Date of creation: 07 Apr 2013
Date of revision:
Handle: RePEc:ays:ispwps:paper1308

Contact details of provider:
Phone: 404-413-0235
Fax: 404-413-0244
Web page: http://aysps.gsu.edu/isp/index.html

Related research

Keywords:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Jens Matthias Arnold & Bert Brys & Christopher Heady & Åsa Johansson & Cyrille Schwellnus & Laura Vartia, 2011. "Tax Policy for Economic Recovery and Growth," Economic Journal, Royal Economic Society, vol. 121(550), pages F59-F80, February.
  2. Ilja Neustadt & Peter Zweifel, 2010. "Is the Welfare State Sustainable? Experimental Evidence on Citizens’ Preferences for Redistribution," SOI - Working Papers 1003, Socioeconomic Institute - University of Zurich.
  3. 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.
  4. Christian Bjørnskov & Axel Dreher & Justina A. V. Fischer, 2006. "Cross-country determinants of life satisfaction: exploring different determinants across groups in society," LSE Research Online Documents on Economics 19290, London School of Economics and Political Science, LSE Library.
  5. Guglielmo Barone & Sauro Mocetti, 2009. "Tax morale and public spending inefficiency," Temi di discussione (Economic working papers) 732, Bank of Italy, Economic Research and International Relations Area.
  6. Charles H. Breeden & William J. Hunter, 1985. "Tax Revenue and Tax Structure," Public Finance Review, , vol. 13(2), pages 216-224, April.
  7. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  8. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2004. "Societal Institutions and Tax Effort in Developing Countries," CREMA Working Paper Series 2004-21, Center for Research in Economics, Management and the Arts (CREMA).
  9. Francesco Grigoli Author-Email: fgrigoli@imf.org Author-Name: Eduardo Ley Author-Email: eley@worldbank.org, 2012. "Quality of Government and Living Standards," World Bank - Economic Premise, The World Bank, issue 89, pages 1-6, September.
  10. 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.
  11. 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.
  12. Bird, Richard, 2010. "Taxation and Development," World Bank - Economic Premise, The World Bank, issue 34, pages 1-5, September.
  13. Thandika Mkandawire, 2010. "On Tax Efforts and Colonial Heritage in Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 46(10), pages 1647-1669.
  14. Cukierman, Alex & Edwards, Sebastian & Tabellini, Guido, 1992. "Seigniorage and Political Instability," American Economic Review, American Economic Association, vol. 82(3), pages 537-55, June.
  15. John G. Cullis & Philip R. Jones, 1987. "Fiscal Illusion and "Excessive" Budgets: Some Indirect Evidence," Public Finance Review, , vol. 15(2), pages 219-228, April.
  16. 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.
  17. Walter Misiolek & Harold Elder, 1988. "Tax structure and the size of government: An empirical analysis of the fiscal illusion and fiscal stress arguments," Public Choice, Springer, vol. 57(3), pages 233-245, June.
  18. Léonce Ndikumana & Kaouther Abderrahim, 2010. "Revenue Mobilization in African Countries: Does Natural Resource Endowment Matter?," African Development Review, African Development Bank, vol. 22(3), pages 351-366.
  19. Carola Pessino & Ricardo Fenochietto, 2010. "Determining countries’ tax effort," Hacienda Pública Española, IEF, vol. 195(4), pages 65-87, december.
  20. 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.
  21. 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.
  22. Vincent Munley & Kenneth Greene, 1978. "Fiscal illusion, the nature of public goods and equation specification," Public Choice, Springer, vol. 33(1), pages 95-100, March.
  23. 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.
  24. Samuel H. Baker, 1983. "The Determinants of Median Voter Tax Liability: an Empirical Test of the Fiscal Illusion Hypothesis," Public Finance Review, , vol. 11(1), pages 95-108, January.
  25. Richard Wagner, 1976. "Revenue structure, fiscal illusion, and budgetary choice," Public Choice, Springer, vol. 25(1), pages 45-61, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Richard M. Bird, 2014. "Reflections on Measuring Urban Fiscal Health," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1425, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ays:ispwps:paper1308. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Benson).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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