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Tax Effort: The Impact of Corruption, Voice and Accountability

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  • Richard M. Bird
  • Jorge Martinez-Vazquez
  • Benno Torgler

Abstract

In this paper we argue that a more legitimate and responsive state is an essential factor for a more adequate level of tax effort in developing countries. While at first glance giving such advice to poor countries seeking to increase their tax ratios may not seem more helpful than telling them to find oil, it is presumably more feasible for people to improve their governing institutions than to rearrange nature?s bounty. Improving corruption, voice and accountability may not take longer nor be necessarily more difficult than changing the opportunities for tax handles and economic structure. The key contribution of this paper is to extend the conventional model of tax effort by showing that not only do supply factors matter, but that demand factors such as corruption, voice and accountability also determine tax effort to a significant extent.

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Bibliographic Info

Paper provided by Center for Research in Economics, Management and the Arts (CREMA) in its series CREMA Working Paper Series with number 2007-13.

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Date of creation: Jul 2007
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Handle: RePEc:cra:wpaper:2007-13

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Keywords: Tax effort; tax reforms; developing countries; Latin America; corruption; voice and accountability;

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References

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  1. Peter Lindert, 2003. "Voice and Growth: Was Churchill Right?," Working Papers 26, University of California, Davis, Department of Economics.
  2. Best, Michael H., 1976. "Political power and tax revenues in Central America," Journal of Development Economics, Elsevier, vol. 3(1), pages 49-82, March.
  3. Andrei Shleifer & Robert W. Vishny, 1998. "The Quality of Government," Harvard Institute of Economic Research Working Papers 1847, Harvard - Institute of Economic Research.
  4. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2004. "Societal Institutions and Tax Effort in Developing Countries," International Tax Program Papers 0411, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  5. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
  6. Simeon Djankov & Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, . "The Regulation of Entry," Working Paper 19462, Harvard University OpenScholar.
  7. Peter Lindert, 2004. "Social Spending and Economic Growth," Challenge, M.E. Sharpe, Inc., vol. 47(4), pages 6-16, July.
  8. Messere, Ken & de Kam, Flip & Heady, Christopher, 2003. "Tax Policy: Theory and Practice in OECD Countries," OUP Catalogue, Oxford University Press, number 9780199241484.
  9. Hettich,Walter & Winer,Stanley L., 2005. "Democratic Choice and Taxation," Cambridge Books, Cambridge University Press, number 9780521021807, November.
  10. Richard M. Bird, 2014. "Administrative Dimensions of Tax Reform," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 963-992, November.
  11. Richard M. bird, 2003. "Taxation in Latin America: Reflections on Sustainability and the Balance between Equity and Efficiency," International Tax Program Papers 0306, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  12. Jorge Martinez-Vazquez, 2001. "Mexico: An Evaluation of the Main Features of the Tax System," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0112, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  13. Chen, Martha Alter, 2005. "Rethinking the Informal Economy: Linkages with the Formal Economy and the Formal Regulatory Environment," Working Paper Series RP2005/10, World Institute for Development Economic Research (UNU-WIDER).
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Cited by:
  1. Dong, Bin & Dulleck, Uwe & Torgler, Benno, 2012. "Conditional corruption," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 609-627.
  2. Richard M Bird & Eric M Zolt, 2008. "Tax policy in emerging countries," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 26(1), pages 73-86, February.
  3. Asongu Simplice & Mohamed Jellal, 2013. "On the channels of foreign aid to corruption," Working Papers 13/018, African Governance and Development Institute..

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