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The Effect of Corruption and Governance on Tax Revenues

  • Tahseen Ajaz

    (University of Wah, Wah Cant)

  • Eatzaz Ahmad

    (, Quaid-i-Azam University, Islamabad)

Registered author(s):

    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.

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    File URL: http://www.pide.org.pk/pdf/PDR/2010/Volume4/405-417.pdf
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    Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

    Volume (Year): 49 (2010)
    Issue (Month): 4 ()
    Pages: 405–417

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    Handle: RePEc:pid:journl:v:49:y:2010:i:4:p:405-417
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    9. Aizenman, Joshua & Jinjarak, Yothin, 2005. "The collection efficiency of the value added tax: theory and international evidence," Santa Cruz Department of Economics, Working Paper Series qt42d103zh, Department of Economics, UC Santa Cruz.
    10. John Thornton & Fabian Bornhorst & Sanjeev Gupta, 2008. "Natural Resource Endowments, Governance, and the Domestic Revenueeffort: Evidence From a Panel of Countries," IMF Working Papers 08/170, International Monetary Fund.
    11. Alm, James & Bahl, Roy & Murray, Matthew N, 1991. "Tax Base Erosion in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 39(4), pages 849-72, July.
    12. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
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    14. Sheetal K. Chand & Karl Ove Moene, 1997. "Controlling Fiscal Corruption," IMF Working Papers 97/100, International Monetary Fund.
    15. John Brondolo & Frank Bosch & Eric Le Borgne & Carlos Silvani, 2008. "Tax Administration Reform and Fiscal Adjustment: The Case of Indonesia(2001-07)," IMF Working Papers 08/129, International Monetary Fund.
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