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Tax Effort in Developing Countries and High Income Countries: The Impact of Corruption, Voice and Accountability

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Listed:
  • Bird, Richard M.

    () (University of Toronto (Canada))

  • Martinez-Vazquez, Jorge

    () (Georgia State University, Atlanta (USA))

  • Torgler, Benno

    () (Queensland University of Technology, Brisbane (Australia))

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 and high income 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 paper also shows that high income countries have also the potential of improving their tax performance through improving their institutions. 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.

Suggested Citation

  • Bird, Richard M. & Martinez-Vazquez, Jorge & Torgler, Benno, 2008. "Tax Effort in Developing Countries and High Income Countries: The Impact of Corruption, Voice and Accountability," Economic Analysis and Policy, Elsevier, vol. 38(1), pages 55-71, March.
  • Handle: RePEc:eee:ecanpo:v:38:y:2008:i:1:p:55-71
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    Keywords

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

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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