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Tax structures in developing countries: Many puzzles and a possible explanation

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  • Gordon, Roger
  • Li, Wei

Abstract

Tax policies seen in developing countries are puzzling on many dimensions, given the sharp contrast between these policies and both those seen in developed countries and those forecast in the optimal tax literature. In this paper, we explore how forecasted policies change if firms can successfully evade taxes by conducting all business in cash, thereby avoiding any use of the financial sector. The forecasted policies are now much closer to those observed.

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  • Gordon, Roger & Li, Wei, 2009. "Tax structures in developing countries: Many puzzles and a possible explanation," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 855-866, August.
    • Handle: RePEc:eee:pubeco:v:93:y:2009:i:7-8:p:855-866
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    More about this item

    Keywords

    Tax policy in developing countries Informal economy Inflation Tariffs Red tape Capital taxes Corruption;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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