IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v66y2020icp137-153.html
   My bibliography  Save this article

Stochastic semi-nonparametric frontier approach for tax administration efficiency measure: Evidence from a cross-country study

Author

Listed:
  • Nguyen, Trang T.T.
  • Prior, Diego
  • Van Hemmen, Stefan

Abstract

Under globalisation, countries all over the world have been impacted differently by both their macroeconomic conditions and other random factors particular to them. As such, governments and policymakers require a comparison of tax systems across different countries and, consequently, a study on the performance of Tax administration (TA) at a cross-country level would be a necessary reference for governments when designing tax policy. This paper seeks to measure the performance of TA across 44 countries, while considering the presence of contextual variables, using the recently developed and advanced frontier estimators, such as the semi-nonparametric StoNED (Stochastic Nonparametric Envelopment of Data) approach by Johnson and Kuosmanen (2011, 2012) and the conditional order-m (Daraio and Simar, 2005, 2007) approach, for two periods between 2008–2011 and 2012–2015. The results show that Tax agencies in these countries could have increased tax revenue, on average, by about 58.7% and 34.2% for the two periods, respectively. Equivalently, $7,737 and $4,667 PPP (purchasing power parity) per capita of tax revenue could have been increased for the two periods, respectively. It is also suggested, in general, the latter period (2012–2015) shows a higher level of efficiency than the former period (2008–2011), justified by both estimators.

Suggested Citation

  • Nguyen, Trang T.T. & Prior, Diego & Van Hemmen, Stefan, 2020. "Stochastic semi-nonparametric frontier approach for tax administration efficiency measure: Evidence from a cross-country study," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 137-153.
  • Handle: RePEc:eee:ecanpo:v:66:y:2020:i:c:p:137-153
    DOI: 10.1016/j.eap.2020.03.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592619305223
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.eap.2020.03.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael Keen, 2013. "The Anatomy of the Vat," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(2), pages 423-446, June.
    2. Timo Kuosmanen & Andrew Johnson & Antti Saastamoinen, 2015. "Stochastic Nonparametric Approach to Efficiency Analysis: A Unified Framework," International Series in Operations Research & Management Science, in: Joe Zhu (ed.), Data Envelopment Analysis, edition 127, chapter 7, pages 191-244, Springer.
    3. Yaron Zelekha, 2017. "Tax Complexity and Corruption," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 63(2), pages 177-210.
    4. Blane Lewis, 2006. "Local government taxation: An analysis of administrative cost inefficiency," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 42(2), pages 213-233.
    5. De Gregorio, Jose, 1993. "Inflation, taxation, and long-run growth," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 271-298, June.
    6. Førsund, Finn R & Kittelsen, Sverre A.C. & Lindseth, Fode & Fjeld Edvaedsen, Dag, 2006. "The Tax Man Cometh - but is he Efficient?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 197, pages 106-119, July.
    7. Keen, Michael & Slemrod, Joel, 2017. "Optimal tax administration," Journal of Public Economics, Elsevier, vol. 152(C), pages 133-142.
    8. Kuosmanen, Timo & Saastamoinen, Antti & Sipiläinen, Timo, 2013. "What is the best practice for benchmark regulation of electricity distribution? Comparison of DEA, SFA and StoNED methods," Energy Policy, Elsevier, vol. 61(C), pages 740-750.
    9. Cinzia Daraio & Léopold Simar, 2005. "Introducing Environmental Variables in Nonparametric Frontier Models: a Probabilistic Approach," Journal of Productivity Analysis, Springer, vol. 24(1), pages 93-121, September.
    10. C. Lovell & Shawna Grosskopf & Eduardo Ley & Jesús Pastor & Diego Prior & Philippe Eeckaut, 1994. "Linear programming approaches to the measurement and analysis of productive efficiency," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 2(2), pages 175-248, December.
    11. Leach,John, 2004. "A Course in Public Economics," Cambridge Books, Cambridge University Press, number 9780521535670, November.
    12. Cherchye, Laurens & De Witte, Kristof & Ooghe, Erwin & Nicaise, Ides, 2010. "Efficiency and equity in private and public education: A nonparametric comparison," European Journal of Operational Research, Elsevier, vol. 202(2), pages 563-573, April.
    13. H. Fried & C. Lovell & S. Schmidt & S. Yaisawarng, 2002. "Accounting for Environmental Effects and Statistical Noise in Data Envelopment Analysis," Journal of Productivity Analysis, Springer, vol. 17(1), pages 157-174, January.
    14. Andrew Johnson & Timo Kuosmanen, 2011. "One-stage estimation of the effects of operational conditions and practices on productive performance: asymptotically normal and efficient, root-n consistent StoNEZD method," Journal of Productivity Analysis, Springer, vol. 36(2), pages 219-230, October.
    15. Badin, Luiza & Daraio, Cinzia & Simar, Léopold, 2010. "Optimal bandwidth selection for conditional efficiency measures: A data-driven approach," European Journal of Operational Research, Elsevier, vol. 201(2), pages 633-640, March.
    16. W. Moesen & A. persoon, 2002. "Measuring and Explaining the Productive Efficiency of Tax Offices. a Non-Parametric Best Practice Frontier Approach," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(3), pages 399-416.
    17. Leslie Robinson & Joel Slemrod, 2012. "Understanding multidimensional tax systems," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(2), pages 237-267, April.
    18. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    19. Salanié, Bernard, 2011. "The Economics of Taxation," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262016346, December.
    20. Léopold Simar & Paul Wilson, 2011. "Inference by the m out of n bootstrap in nonparametric frontier models," Journal of Productivity Analysis, Springer, vol. 36(1), pages 33-53, August.
    21. Kuosmanen, Timo, 2012. "Stochastic semi-nonparametric frontier estimation of electricity distribution networks: Application of the StoNED method in the Finnish regulatory model," Energy Economics, Elsevier, vol. 34(6), pages 2189-2199.
    22. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
    23. Colin Thirtle & Bhavani Shankar & Puneet Chitkara & Somnath Chatterjee & Madhu S. Mohanty, 2000. "Size Does Matter: Technical and Scale Efficiency in Indian State Tax Jurisdictions," Review of Development Economics, Wiley Blackwell, vol. 4(3), pages 340-352, October.
    24. Finn Førsund & Dag Edvardsen & Sverre Kittelsen, 2015. "Productivity of tax offices in Norway," Journal of Productivity Analysis, Springer, vol. 43(3), pages 269-279, June.
    25. Yongzheng Liu & Haibo Feng, 2015. "Tax structure and corruption: cross-country evidence," Public Choice, Springer, vol. 162(1), pages 57-78, January.
    26. Seok-Oh Jeong & Byeong Park & Léopold Simar, 2010. "Nonparametric conditional efficiency measures: asymptotic properties," Annals of Operations Research, Springer, vol. 173(1), pages 105-122, January.
    27. 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.
    28. Antonio Afonso & Ludger Schuknecht & Vito Tanzi, 2010. "Public sector efficiency: evidence for new EU member states and emerging markets," Applied Economics, Taylor & Francis Journals, vol. 42(17), pages 2147-2164.
    29. Cinzia Daraio & Léopold Simar, 2007. "Conditional nonparametric frontier models for convex and nonconvex technologies: a unifying approach," Journal of Productivity Analysis, Springer, vol. 28(1), pages 13-32, October.
    30. James Alm & Denvil Duncan, 2014. "Estimating Tax Agency Efficiency," Public Budgeting & Finance, Wiley Blackwell, vol. 34(3), pages 92-110, September.
    31. Kuosmanen, Timo & Johnson, Andrew, 2017. "Modeling joint production of multiple outputs in StoNED: Directional distance function approach," European Journal of Operational Research, Elsevier, vol. 262(2), pages 792-801.
    32. Haelermans, Carla & De Witte, Kristof, 2012. "The role of innovations in secondary school performance – Evidence from a conditional efficiency model," European Journal of Operational Research, Elsevier, vol. 223(2), pages 541-549.
    33. Johnson, Andrew L. & Kuosmanen, Timo, 2012. "One-stage and two-stage DEA estimation of the effects of contextual variables," European Journal of Operational Research, Elsevier, vol. 220(2), pages 559-570.
    34. Cordero, José Manuel & Alonso-Morán, Edurne & Nuño-Solinis, Roberto & Orueta, Juan F. & Arce, Regina Sauto, 2015. "Efficiency assessment of primary care providers: A conditional nonparametric approach," European Journal of Operational Research, Elsevier, vol. 240(1), pages 235-244.
    35. Kuosmanen, Timo, 2006. "Stochastic Nonparametric Envelopment of Data: Combining Virtues of SFA and DEA in a Unified Framework," Discussion Papers 11864, MTT Agrifood Research Finland.
    36. Mark Andor & Frederik Hesse, 2014. "The StoNED age: the departure into a new era of efficiency analysis? A monte carlo comparison of StoNED and the “oldies” (SFA and DEA)," Journal of Productivity Analysis, Springer, vol. 41(1), pages 85-109, February.
    37. Rajiv D. Banker & Ram Natarajan, 2008. "Evaluating Contextual Variables Affecting Productivity Using Data Envelopment Analysis," Operations Research, INFORMS, vol. 56(1), pages 48-58, February.
    38. Nieswand, Maria & Seifert, Stefan, 2018. "Environmental factors in frontier estimation – A Monte Carlo analysis," European Journal of Operational Research, Elsevier, vol. 265(1), pages 133-148.
    39. Luis Orea & Subal C. Kumbhakar, 2004. "Efficiency measurement using a latent class stochastic frontier model," Empirical Economics, Springer, vol. 29(1), pages 169-183, January.
    40. Maria Katharaki & Marios Tsakas, 2010. "Assessing the efficiency and managing the performance of Greek tax offices," Journal of Advances in Management Research, Emerald Group Publishing Limited, vol. 7(1), pages 58-75, May.
    41. José Manuel Cordero & Cristina Polo & Daniel Santín & Gabriela Sicilia, 2016. "Monte-Carlo Comparison of Conditional Nonparametric Methods and Traditional Approaches to Include Exogenous Variables," Pacific Economic Review, Wiley Blackwell, vol. 21(4), pages 483-497, October.
    42. Rajul Awasthi & Nihal Bayraktar, 2015. "Can tax simplification help lower tax corruption?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 297-330, December.
    43. Carlos Pestana Barros, 2005. "Performance measurement in tax offices with a stochastic frontier model," Journal of Economic Studies, Emerald Group Publishing, vol. 32(5), pages 497-510, October.
    44. Elena Villar Rubio & Pedro Enrique Barrilao González & Juan Delgado Alaminos, 2017. "Relative efficiency within a tax administration: The effects of result improvement," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 9(1), pages 135-149, February.
    45. Cazals, Catherine & Florens, Jean-Pierre & Simar, Leopold, 2002. "Nonparametric frontier estimation: a robust approach," Journal of Econometrics, Elsevier, vol. 106(1), pages 1-25, January.
    46. Shwu-Huei Huang & Ming-Miin Yu & Ming-Shenq Hwang & Yu-Shan Wei & Ming-Huei Chen, 2017. "Efficiency of Tax Collection and Tax Management in Taiwan's Local Tax Offices," Pacific Economic Review, Wiley Blackwell, vol. 22(4), pages 620-648, October.
    47. Jha, Raghbendra & Sahni, Balbir S, 1997. "Tax Efficiency and Productivity Analysis: The Case of Canadian Fiscal Federalism," Public Finance = Finances publiques, , vol. 52(2), pages 186-197.
    48. Leach,John, 2004. "A Course in Public Economics," Cambridge Books, Cambridge University Press, number 9780521828772, November.
    49. Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
    50. Thirtle, Colin, et al, 2000. "Size Does Matter: Technical and Scale Efficiency in Indian State Tax Jurisdictions," Review of Development Economics, Wiley Blackwell, vol. 4(3), pages 340-352, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nguyen, Trang Thi Thuy & Pham, Binh Thai & Prior, Diego & van Hemmen, Stefan, 2022. "Performance of tax simplification around the world: A panel frontier analysis," Socio-Economic Planning Sciences, Elsevier, vol. 80(C).
    2. Anastasiou Athanasios & Kalligosfyris Charalampos & Kalamara Eleni, 2022. "Assessing the effectiveness of tax administration in macroeconomic stability: evidence from 26 European Countries," Economic Change and Restructuring, Springer, vol. 55(4), pages 2237-2261, November.
    3. Efecan, Volkan & Temiz, İzzettin, 2023. "Assessing the technical efficiency of container ports based on a non-monotonic inefficiency effects model," Utilities Policy, Elsevier, vol. 81(C).
    4. Milosavljević, Miloš & Radovanović, Sandro & Delibašić, Boris, 2023. "What drives the performance of tax administrations? Evidence from selected european countries," Economic Modelling, Elsevier, vol. 121(C).
    5. Belmonte-Martin, Irene & Ortiz, Lidia & Polo, Cristina, 2021. "Local tax management in Spain: A study of the conditional efficiency of provincial tax agencies," Socio-Economic Planning Sciences, Elsevier, vol. 78(C).
    6. Balak, Sima & Behzadi, Mohammad Hassan & Nazari, Ali, 2021. "Stochastic copula-DEA model based on the dependence structure of stochastic variables: An application to twenty bank branches," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 326-341.
    7. Martínez, Yolanda Ubago & Arzoz, Pedro Pascual & Arregui, Idoia Zabaleta, 2022. "Tax collection efficiency in OECD countries improves via decentralization, simplification, digitalization and education," Journal of Policy Modeling, Elsevier, vol. 44(2), pages 298-318.
    8. Alexander Arévalo S & Víctor Giménez G & Diego Prior J, 2022. "Análisis de eficiencia en educación: una aplicación del método StoNED," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, vol. 92(2), pages 45-91, October.
    9. Liu, Fangmei & Li, Li & Ye, Bin & Qin, Quande, 2023. "A novel stochastic semi-parametric frontier-based three-stage DEA window model to evaluate China's industrial green economic efficiency," Energy Economics, Elsevier, vol. 119(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jose M. Cordero & Cristina Polo & Daniel Santín, 2020. "Assessment of new methods for incorporating contextual variables into efficiency measures: a Monte Carlo simulation," Operational Research, Springer, vol. 20(4), pages 2245-2265, December.
    2. Nieswand, Maria & Seifert, Stefan, 2018. "Environmental factors in frontier estimation – A Monte Carlo analysis," European Journal of Operational Research, Elsevier, vol. 265(1), pages 133-148.
    3. repec:diw:diwwpp:dp1585 is not listed on IDEAS
    4. José Manuel Cordero & Carlos Díaz Caro & Francisco Pedraja Chaparro & Cristina Polo Fernández, 2020. "Tributos cedidos y eficiencia en la gestión tributaria de las Comunidades Autónomas," Hacienda Pública Española / Review of Public Economics, IEF, vol. 232(1), pages 75-112, March.
    5. José Manuel Cordero & Cristina Polo & Daniel Santín & Gabriela Sicilia, 2016. "Monte-Carlo Comparison of Conditional Nonparametric Methods and Traditional Approaches to Include Exogenous Variables," Pacific Economic Review, Wiley Blackwell, vol. 21(4), pages 483-497, October.
    6. Martínez, Yolanda Ubago & Arzoz, Pedro Pascual & Arregui, Idoia Zabaleta, 2022. "Tax collection efficiency in OECD countries improves via decentralization, simplification, digitalization and education," Journal of Policy Modeling, Elsevier, vol. 44(2), pages 298-318.
    7. Belmonte-Martin, Irene & Ortiz, Lidia & Polo, Cristina, 2021. "Local tax management in Spain: A study of the conditional efficiency of provincial tax agencies," Socio-Economic Planning Sciences, Elsevier, vol. 78(C).
    8. Cordero Ferrera, Jose Manuel & Alonso Morán, Edurne & Nuño Solís, Roberto & Orueta, Juan F. & Souto Arce, Regina, 2013. "Efficiency assessment of primary care providers: A conditional nonparametric approach," MPRA Paper 51926, University Library of Munich, Germany.
    9. Elena Villar Rubio & Pedro Enrique Barrilao González & Juan Delgado Alaminos, 2017. "Relative efficiency within a tax administration: The effects of result improvement," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 9(1), pages 135-149, February.
    10. Bjørndal, Endre & Bjørndal, Mette & Cullmann, Astrid & Nieswand, Maria, 2018. "Finding the right yardstick: Regulation of electricity networks under heterogeneous environments," European Journal of Operational Research, Elsevier, vol. 265(2), pages 710-722.
    11. Cordero, José Manuel & Alonso-Morán, Edurne & Nuño-Solinis, Roberto & Orueta, Juan F. & Arce, Regina Sauto, 2015. "Efficiency assessment of primary care providers: A conditional nonparametric approach," European Journal of Operational Research, Elsevier, vol. 240(1), pages 235-244.
    12. Bădin, Luiza & Daraio, Cinzia & Simar, Léopold, 2019. "A bootstrap approach for bandwidth selection in estimating conditional efficiency measures," European Journal of Operational Research, Elsevier, vol. 277(2), pages 784-797.
    13. Cordero, José Manuel & Salinas-Jiménez, Javier & Salinas-Jiménez, M Mar, 2017. "Exploring factors affecting the level of happiness across countries: A conditional robust nonparametric frontier analysis," European Journal of Operational Research, Elsevier, vol. 256(2), pages 663-672.
    14. Luiza Bădin & Cinzia Daraio & Léopold Simar, 2014. "Explaining inefficiency in nonparametric production models: the state of the art," Annals of Operations Research, Springer, vol. 214(1), pages 5-30, March.
    15. Fusco, Elisa & Vidoli, Francesco & Sahoo, Biresh K., 2018. "Spatial heterogeneity in composite indicator: A methodological proposal," Omega, Elsevier, vol. 77(C), pages 1-14.
    16. Panayiotis Tzeremes, 2020. "Productivity, efficiency and firm’s market value: Microeconomic evidence from multinational corporations," Bulletin of Applied Economics, Risk Market Journals, vol. 7(1), pages 95-105.
    17. Avellón Naranjo, Blanca & Prieto Jano, María José, 2017. "Los factores determinantes de la eficiencia en la gestión de las Administraciones Tributarias Autonómicas españolas/The Determinants of Efficiency in the Tax Management of the Spanish Regional Tax Adm," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 35, pages 749-776, Agosto.
    18. Saastamoinen, Antti & Bjørndal, Endre & Bjørndal, Mette, 2017. "Specification of merger gains in the Norwegian electricity distribution industry," Energy Policy, Elsevier, vol. 102(C), pages 96-107.
    19. Cinzia Daraio & Léopold Simar & Paul W. Wilson, 2020. "Fast and efficient computation of directional distance estimators," Annals of Operations Research, Springer, vol. 288(2), pages 805-835, May.
    20. Juan Aparicio & Jose Manuel Cordero & Carlos Díaz-Caro, 2020. "Efficiency and productivity change of regional tax offices in Spain: an empirical study using Malmquist–Luenberger and Luenberger indices," Empirical Economics, Springer, vol. 59(3), pages 1403-1434, September.
    21. Bădin, Luiza & Daraio, Cinzia & Simar, Léopold, 2012. "How to measure the impact of environmental factors in a nonparametric production model," European Journal of Operational Research, Elsevier, vol. 223(3), pages 818-833.

    More about this item

    Keywords

    Tax administration; Efficiency analysis; Contextual variable; StoNED; Conditional order-m;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:66:y:2020:i:c:p:137-153. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.