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Determinants of Tax Revenue Efforts in Developing Countries

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  • Abhijit Sen Gupta

Abstract

This paper contributes to the existing empirical literature on the principal determinants of tax revenue performance across developing countries by using a broad dataset and accounting for some econometric issues that were previously ignored. The results confirm that structural factors such as per capita GDP, agriculture share in GDP, trade openness and foreign aid significantly affect revenue performance of an economy. Other factors include corruption, political stability, share of direct and indirect taxes etc. The paper also makes use of a revenue performance index, and finds that while several Sub Saharan African countries are performing well above their potential, some Latin American economies fall short of their revenue potential.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/184.

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Length: 39
Date of creation: 01 Jul 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/184

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Keywords: Taxes; Tax revenues; Developing countries; tax revenue; government revenue; export share; foreign debt; tax ratio; per capita income; trade openness; trade share; indirect taxes; tax effort; tax share; average tariffs; open economies; taxation; tax potential; tax performance; tax base; trade liberalization; fiscal policy; exporting countries; tax rates; export ratio; tax efforts; tax systems; budget surplus; tax policy; political economy; tax administration; international trade; domestic subsidies; tax ratios; average tariff; primary budget surplus; non-tariff barriers; tariff barriers; tariff rates; income distribution; eliminating tariffs; trade taxes; terms of trade; tariff peaks; structural adjustment; tariff revenue; reduction in tariffs; external indebtedness; import tariffs; import taxes;

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References

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  1. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  2. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2014. "Societal Institutions and Tax Effort in Developing Countries," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 301-351, May.
  3. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  4. Alexander Pivovarsky & Benedict J. Clements & Sanjeev Gupta & Erwin Tiongson, 2003. "Foreign Aid and Revenue Response," IMF Working Papers 03/176, International Monetary Fund.
  5. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  6. Raja J. Chelliah, 1971. "Trends in Taxation in Developing Countries (Les tendances de la fiscalité dans les pays en voie de développement) (Tendencias tributarias en los países en desarrollo)," IMF Staff Papers, Palgrave Macmillan, vol. 18(2), pages 254-331, July.
  7. Dhaneshwar Ghura, 1998. "Tax Revenue in Sub-Saharan Africa," IMF Working Papers 98/135, International Monetary Fund.
  8. Leuthold, Jane H., 1991. "Tax shares in developing economies A panel study," Journal of Development Economics, Elsevier, vol. 35(1), pages 173-185, January.
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Citations

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Cited by:
  1. Gustavo Canavire-Bacarreza & Nicolas Guadalupe Zuniga Espinoza, 2010. "Fiscal Transfers a Curse or Blessing? Evidence of Their Effect on Tax Effort for Municipalities in Sinaloa, Mexico," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1030, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  2. Lucotte, Yannick, 2010. "Adoption of inflation targeting and tax revenue performance in emerging market economies: An empirical investigation," MPRA Paper 23871, University Library of Munich, Germany.
  3. Le, Tuan Minh & Moreno-Dodson, Blanca & Bayraktar, Nihal, 2012. "Tax capacity and tax effort : extended cross-country analysis from 1994 to 2009," Policy Research Working Paper Series 6252, The World Bank.
  4. Knack, Stephen, 2008. "Sovereign rents and the quality of tax policy and administration," Policy Research Working Paper Series 4773, The World Bank.
  5. Isidro Hernandez Rodríguez, 2011. "Tributación y desarrollo en perspectiva," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 13(24), pages 271-302, January-J.
  6. Anders Jensen, 2011. "State-Building in Resource-Rich Economies," Atlantic Economic Journal, International Atlantic Economic Society, vol. 39(2), pages 171-193, June.
  7. John Thornton & Fabian Bornhorst & Sanjeev Gupta, 2008. "Natural Resource Endowments, Governance, and the Domestic Revenueeffort," IMF Working Papers 08/170, International Monetary Fund.
  8. Alun H. Thomas & Juan P. Treviño, 2013. "Resource Dependence and Fiscal Effort in Sub-Saharan Africa," IMF Working Papers 13/188, International Monetary Fund.
  9. Carola Pessino & Ricardo Fenochietto, 2010. "Determining countries’ tax effort," Hacienda Pública Española, IEF, vol. 195(4), pages 65-87, december.

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