Tackling tax base erosion in developing countries: Does information exchange initiative make a difference?

This study investigates how multilateral cooperation on tax information exchange affects tax revenue mobilization in developing countries. In response to global efforts to curb tax evasion, the OECD launched the Global Forum on Transparency and Exchange of Information for Tax Purposes. Focusing on its core objective of enhancing tax transparency, we analyze the impact of Forum membership on non-resource direct tax revenues in 60 developing countries from 2000 to 2020. Using a semi-parametric difference-in-differences approach, we find that membership significantly boosts tax revenues. These results are robust to alternative estimation techniques and remain consistent across disaggregated tax data. Our findings highlight the critical role of cross-border information exchange in improving transparency and strengthening domestic revenue systems, particularly where enforcement capacity is limited. By showing that cooperation enhances tax collection without compromising investment attractiveness, this study contributes to debates on international tax reform and the Base Erosion and Profit Shifting (BEPS) agenda, emphasizing the value of information sharing and capacity building for equitable tax governance.