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The Effect of Corruption and Governance on Tax Revenues

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  • Tahseen Ajaz

    (University of Wah, Wah Cant)

  • Eatzaz Ahmad

    (, Quaid-i-Azam University, Islamabad)

Abstract

Developing countries face a number of institutional problems in the process of revenue generation. One of the main problems is the corruption in tax administration. The second main problem of low revenue generation is the low quality of governance. This study analyses the effect of institutional and structural variables (corruption and governance) on tax revenues using a panel data set for 25 developing countries over the period 1990-2005. The GMM regression results show that corruption has an adverse effect on tax collection, while good governance contributes to better performance in tax collection. It is further observed that institutional variables have a significant effect on tax revenues.

Suggested Citation

  • Tahseen Ajaz & Eatzaz Ahmad, 2010. "The Effect of Corruption and Governance on Tax Revenues," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 405-417.
    • Handle: RePEc:pid:journl:v:49:y:2010:i:4:p:405-417
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    References listed on IDEAS

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    2. Aamer Taj & Fahad Abdullah, 2017. "Discrepancies in Fiscal Architecture: Context and Causes of Devolution Reforms’ Outcomes in Khyber Pakhtunkhwa, Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(2), pages 203-224, June.
    3. Tugay Gunel & Irem Didinmez, 2022. "Relationship between rule of law and tax revenues: dynamic panel data analysis," Public Sector Economics, Institute of Public Finance, vol. 46(3), pages 403-419.
    4. Nurudeen Abu & Mohd Zaini Abd Karim & Joseph David & Musa Abdullahi Sakanko & Onyewuchi Amaechi Ben-Obi & Awadh Ahmed Mohammed Gamal, 2022. "The Behaviour of Tax Revenue amid Corruption in Nigeria: Evidence from the Non-Linear ARDL Approach," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 55-76.
    5. Salvatore Capasso & Lorenzo Cicatiello & Elina De Simone & Lodovico Santoro, 2022. "Corruption and tax revenues: Evidence from Italian regions," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(4), pages 1129-1152, December.
    6. Lien, Nguyen Phuong, 2015. "The impact of institutional quality on tax revenue in developing countries," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 5(10), pages 181-195, October.
    7. John Bosco Nnyanzi & John Bbale & Richard Sendi, 2018. "Financial Development and Tax Revenue: How Catalytic Are Political Development and Corruption?," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(8), pages 1-92, August.
    8. Md. Harun Ur Rashid & Afzal Ahmad & Muhammad Saleh Abdullah & Monir Ahmmed & Serajul Islam, 2022. "Doing Business and Tax Evasion: Evidence from Asian Countries," SAGE Open, , vol. 12(4), pages 21582440221, October.
    9. Samir Ul-Hassan & Biswambhara Mishra, 2018. "Does an Economic and Political Affairs Matter in Determining the Tax Revenue of Jammu and Kashmir State (India): An Approach through VECM Model," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 22(2), pages 471-501, Spring.
    10. Yawovi Mawussé Isaac Amedanou, 2021. "Politics, Institutions and Tax Revenue Mobilization in West African Economic and Monetary Union (WAEMU) Countries," CERDI Working papers hal-03255316, HAL.
    11. Richard Adeleke, 2022. "Spatial variability of the predictors of government tax revenue in Nigeria," SN Business & Economics, Springer, vol. 2(1), pages 1-20, January.
    12. Emmanuel Ekow Asmah & Francis Kwaw Andoh & Edem Titriku, 2020. "Trade misinvoicing effects on tax revenue in sub‐Saharan Africa: The role of tax holidays and regulatory quality," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(4), pages 649-672, December.
    13. Arvin, Mak B. & Pradhan, Rudra P. & Nair, Mahendhiran S., 2021. "Are there links between institutional quality, government expenditure, tax revenue and economic growth? Evidence from low-income and lower middle-income countries," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 468-489.
    14. Mohammed Aminu Yaru, 2022. "Budget transparency and internal revenue mobilisation at sub-national government level: evidence from Nigeria," Public Sector Economics, Institute of Public Finance, vol. 46(4), pages 505-531.
    15. Yaru, Mohammed Aminu & Raji, Ajibola Simbiat, 2021. "Corruption, Governance and Tax Revenue Performance in Sub-Saharan Africa," African Journal of Economic Review, African Journal of Economic Review, vol. 10(1), December.
    16. Yawovi Mawussé Isaac Amedanou, 2021. "Politics, Institutions and Tax Revenue Mobilization in West African Economic and Monetary Union (WAEMU) Countries," Working Papers hal-03255316, HAL.
    17. Uyar, Ali & Nimer, Khalil & Kuzey, Cemil & Shahbaz, Muhammad & Schneider, Friedrich, 2021. "Can e-government initiatives alleviate tax evasion? The moderation effect of ICT," Technological Forecasting and Social Change, Elsevier, vol. 166(C).
    18. Olusegun Ayodele Akanbi, 2019. "State Institutions and Tax Capacity: An Empirical Investigation of Causality," IMF Working Papers 2019/177, International Monetary Fund.
    19. Aminu Yaru, Mohammed & Aminu Yaru, Mohammed & Awodun, Muritala, 2019. "Tax Administration In The Informal Sector: Kwara State Internal Revenue Service Perspective," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 6(6), pages 1-12, June.
    20. Md. Harun Ur Rashid & Noman Uddin & Md. Shariful Haque & Syed Zabid Hossain, 2022. "Good governance and tax evasion: mediating effect of socioeconomic conditions," Asia-Pacific Journal of Regional Science, Springer, vol. 6(2), pages 759-776, June.
    21. Wilsa Road Betterment Sitepu & Salwani Arbak, 2023. "Factors Affecting Tax Compliance by Small and Medium Enterprises in Indonesia," Oblik i finansi, Institute of Accounting and Finance, issue 4, pages 60-71, December.
    22. Mohd Zulkhairi Mustapha1 & Eric H. Y. Koh & Sok-Gee Chan & Zulkufly Ramly, 2017. "The Role of Corruption Control in Moderating the Relationship Between Value Added Tax and Income Inequality," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 459-467.
    23. Prianto Budi Saptono & Gustofan Mahmud, 2022. "Institutional environment and tax performance: empirical evidence from developing economies," Public Sector Economics, Institute of Public Finance, vol. 46(2), pages 207-237.

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    More about this item

    Keywords

    Public Economics;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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