Effective versus Statutory Taxation: Measuring Effective Tax Administration in Transition Economies
AbstractWide differences between effective or realised average tax rates and tax yields that would result if statutory tax rates were strictly applied indicate tax compliance and collection problems. Due to the greater politicisation of tax systems in transition economies (TEs), we would expect the shortfalls in effective tax yields for TEs to be larger than a benchmark for the mature market economies where tax systems are well established, the administrative capacity is stronger and tax arrears are tolerated less frequently. The methodology involves calculating an effective/statutory (E/S) tax ratio. Initial results indicate that the leading TEs have E/S ratios similar to the EU average. We find a positive correlation between progress in transition and effective tax administration, as measured by our E/S ratio. For slow reformers, the effectiveness of tax collection appears to vary with the extent of state control. Those TEs that have maintained the apparatus of the state have done well in tax collection compared to those countries where there is evidence of state decay. This raises a number of broad policy issues relating to the speed of transition, the interaction of politics and economic reforms, the capacity of the state to govern and the need for market institutions to develop.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 347.
Date of creation: 01 Nov 2000
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statutory taxation; average tax rate; tax collection; effective administration; transition economies;
Other versions of this item:
- Mark Schaffer & Gerard Turley, 2000. "Effective versus Statutory Taxation: Measuring Effective Tax Administration in Transition Economies," CERT Discussion Papers 0008, Centre for Economic Reform and Transformation, Heriot Watt University.
- Mark E. Schaffer & Gerard Turley, 2001. "Effective versus statutory taxation: measuring effective tax administration in transition economies," Working Papers 62, European Bank for Reconstruction and Development, Office of the Chief Economist.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
- P5 - Economic Systems - - Comparative Economic Systems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-10-01 (All new papers)
- NEP-EEC-2001-10-01 (European Economics)
- NEP-PBE-2001-10-01 (Public Economics)
- NEP-PUB-2001-10-01 (Public Finance)
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