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Structural transformation and tax efficiency

Author

Listed:
  • Serhan Cevik
  • Jan Gottschalk
  • Eric Hutton
  • Laura Jaramillo
  • Pooja Karnane
  • Mousse Sow

Abstract

Structural transformation has resulted in an increasing share of services in output and employment in advanced and developing countries across the world. We analyse the impact of this shift into services on countries' efficiency in collecting the value‐added tax (VAT). The analysis is based on two alternative measures of VAT productivity: (a) the VAT C‐efficiency, using a broad panel of 134 countries over the period 1970–2014 and (b) the VAT gap using a more granular, proprietary data set that draws on the results of the International Monetary Fund's (IMF's) Revenue Administration‐Gap Analysis Program covering 24 countries over the period 2004–2016. We find that a higher share of services in aggregate value‐added reduces the VAT efficiency, and that this adverse effect is mainly a result of a rise of nontradable services which in turn contributes to a narrowing of the VAT base.

Suggested Citation

  • Serhan Cevik & Jan Gottschalk & Eric Hutton & Laura Jaramillo & Pooja Karnane & Mousse Sow, 2019. "Structural transformation and tax efficiency," International Finance, Wiley Blackwell, vol. 22(3), pages 341-379, December.
    • Handle: RePEc:bla:intfin:v:22:y:2019:i:3:p:341-379
    DOI: 10.1111/infi.12346
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    Cited by:

    1. Iva Hasikova & Jan Hanousek, 2025. "VAT (non)compliance in the EU: Damaging corruption and shadow economy spillovers vs. government effectiveness and efficiency," MENDELU Working Papers in Business and Economics 2025-100, Mendel University in Brno, Faculty of Business and Economics.
    2. Elisey Leonov, Ilya Sokolov, 2020. "VALUE ADDED TAX COLLECTION: Identifying New Determinants," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, pages 1-24, December.
    3. repec:ers:journl:v:xxiv:y:2021:i:4b:p:851-882 is not listed on IDEAS
    4. Caro, Paolo Di & Sacchi, Agnese, 2020. "The heterogeneous effects of labor informality on VAT revenues: Evidence on a developed country," Journal of Macroeconomics, Elsevier, vol. 63(C).

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