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Determining countries’ tax effort

Author

Listed:
  • Carola Pessino

    (Universidad de Torcuato Di Tella)

  • Ricardo Fenochietto

    (Fiscal Affairs Department, International Monetary Fund (IMF))

Abstract

This paper presents a model to determine the tax effort and tax capacity of 96 countries and the main variables from which they depend. The results and the model allow us to clearly determine which countries are near their tax capacity and which are some way from it, and therefore, could increase their tax revenue. Our study corroborates previous analysis inasmuch as the positive and significant relationship between tax revenue as percent of GDP and the level of development (per capita GDP), trade (imports and exports as percent of GDP) and education (public expenditure on education as percent of GDP). The study also demonstrates the negative relationship between tax revenue and inflation (CPI), income distribution (GINI coefficient), the ease of tax collection (agricultural sector value added as GDP percent), and corruption.

Suggested Citation

  • Carola Pessino & Ricardo Fenochietto, 2010. "Determining countries’ tax effort," Hacienda Pública Española, IEF, vol. 195(4), pages 65-87, december.
  • Handle: RePEc:hpe:journl:y:2010:v:195:i:4:p:65-87
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Crivelli, Ernesto & Gupta, Sanjeev, 2014. "Resource blessing, revenue curse? Domestic revenue effort in resource-rich countries," European Journal of Political Economy, Elsevier, pages 88-101.
    2. Moore, Mick, 2014. "Revenue Reform and Statebuilding in Anglophone Africa," World Development, Elsevier, vol. 60(C), pages 99-112.
    3. Jean-Louis Combes & Rasmané Ouedraogo, 2016. "How Does Inclusive Growth Boost Tax Revenue Mobilization?," Working Papers halshs-01281914, HAL.
    4. repec:nax:conyad:v:62:y:2017:i:3:p:1001-1018 is not listed on IDEAS
    5. Matteo Ghilardi & Sergio Sola, 2015. "Investment Scaling-up and the Role of Government; the Case of Benin," IMF Working Papers 15/69, International Monetary Fund.
    6. Musharraf Cyan & Jorge Martinez-Vazquez & VIoleta Vulovic, 2013. "Measuring tax effort: Does the estimation approach matter and should effort be linked to expenditure goals?," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1308, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    7. Ernesto Crivelli & Sanjeev Gupta, 2016. "Does conditionality in IMF-supported programs promote revenue reform?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(3), pages 550-579, June.
    8. Jaime Bonet-Morón & Gerson Javier Pérez-Valbuena & Diana Ricciulli-Marin, 2017. "¿Hay pereza fiscal territorial en Colombia?," DOCUMENTOS DE TRABAJO SOBRE ECONOMÍA REGIONAL Y URBANA 015910, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
    9. International Monetary Fund, 2013. "Panama; Selected Issues," IMF Staff Country Reports 13/89, International Monetary Fund.
    10. Ángeles Castro Gerardo & Ramírez Camarillo Diana Berenice, 2014. "Determinants of tax revenue in OECD countries over the period 2001-2011," Contaduría y Administración, Accounting and Management, vol. 59(3), pages 35-60, julio-sep.
    11. Jaime Bonet Moron & Fabio Rueda Devivero, 2013. "Esfuerzo fiscal municipal en Guatemala," REVISTA ECONOMÍA & REGIÓN, UNIVERSIDAD TECNOLÓGICA DE BOLÍVAR, vol. 7(2), pages 5-41, December.
    12. repec:idb:brikps:79878 is not listed on IDEAS
    13. Gómez Sabaini, Juan Carlos & Morán, Dalmiro, 2014. "Tax policy in Latin America: Assessment and guidelines for a second generation of reforms," Macroeconomía del Desarrollo 133, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    14. Teresa Ter-Minassian, 2012. "Reform Priorities for Sub-national Revenues in Brazil," Research Department Publications 4772, Inter-American Development Bank, Research Department.
    15. Jaime Alfredo Bonet & Fabio Rueda, 2012. "Esfuerzo fiscal en los estados mexicanos," IDB Publications (Working Papers) 64598, Inter-American Development Bank.
    16. Musharraf Rasool Cyan & Jorge Martinez-Vazquez & Violeta Vulovic, 2014. "New approaches to measuring tax effort," Chapters,in: Taxation and Development: The Weakest Link?, chapter 2, pages 27-68 Edward Elgar Publishing.
    17. Caglayan, Mustafa & Xu, Bing, 2016. "Sentiment volatility and bank lending behavior," International Review of Financial Analysis, Elsevier, pages 107-120.
    18. International Monetary Fund, 2013. "Portugal; Selected Issues Paper," IMF Staff Country Reports 13/19, International Monetary Fund.
    19. Jean-François Brun & Maïmouna Diakite, 2016. "Tax Potential and Tax Effort: An Empirical Estimation for Non-resource Tax Revenue and VAT’s Revenue," Working Papers halshs-01332053, HAL.
    20. Nihal Bayraktar, 2016. "Tax simplification and tax efficiency," EcoMod2016 9100, EcoMod.
    21. International Monetary Fund, 2014. "The Bahamas; Tax Reforms for Increased Buoyancy," IMF Staff Country Reports 14/17, International Monetary Fund.
    22. John Norregaard, 2013. "Taxing Immovable Property Revenue Potential and Implementation Challenges," IMF Working Papers 13/129, International Monetary Fund.
    23. Ivanyna, Maksym & von Haldenwang, Christian, 2012. "A comparative view on the tax performance of developing countries: Regional patterns, non-tax revenue and governance," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-44.

    More about this item

    Keywords

    tax effort; tax frontier; tax capacity; tax revenue; stochastic tax frontier; inefficiency.;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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