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Tax revenue potential and effort: Worldwide estimates using a new dataset

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  • Mawejje, Joseph
  • Sebudde, Rachel K.

Abstract

Domestic revenue mobilization has gained renewed attention in the post 2015 period owing in part to the “billions to trillions” drive to mobilize resources to finance the sustainable development goals. While authorities now realize the importance of strengthening efforts to collect more taxes, attempts to quantify the tax potential, and consequently the magnitude of the gap to close by countries wishing to improve their tax revenue outcomes, have been limited. This study provides estimates of tax potential and effort in a panel of 150 countries around the world. Using stochastic frontier methods, the analysis is based on a new Government Revenue Dataset from the International Centre for Tax and Development and spans a 20-year period during 1996–2015. Results indicate that while there is marked heterogeneity in individual country outcomes, countries that operate closer to their tax potential have high levels of income, large shares of non-agricultural output, large trade shares in GDP, invest more in human capital development, have more developed financial sectors, more stable domestic environments (with low inflation), more urbanized populations, and lower corruption.

Suggested Citation

  • Mawejje, Joseph & Sebudde, Rachel K., 2019. "Tax revenue potential and effort: Worldwide estimates using a new dataset," Economic Analysis and Policy, Elsevier, vol. 63(C), pages 119-129.
    • Handle: RePEc:eee:ecanpo:v:63:y:2019:i:c:p:119-129
    DOI: 10.1016/j.eap.2019.05.005
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    More about this item

    Keywords

    Tax potential; Tax effort; Stochastic frontier analysis;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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