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Societal Institutions and Tax Effort in Developing Countries

“Will underdeveloped countries learn to tax?” asked Nicholas Kaldor (1963), forty years ago. Underlying this question is the assumption that if a country wishes to become ‘developed’ it needs to collect in taxes an amount greater than the 10-15 percent found in many developing countries. Kaldor’s answer to his question was essentially that since even the poorest country had sufficient ‘capacity’ in both economic and administrative terms to tax more, whether or not a particular country did so depended primarily on its political institutions. Would developing countries be fortunate enough to have those with political power voluntarily give up at least some of their power to block fiscal reform in exchange for social stability? Or would the ruling groups rather wait (in the spirit of après moi le deluge) for the revolutionary upheaval that he considered the only alternative?

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Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0406.

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Length: 53 pages
Date of creation: 01 Sep 2004
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Handle: RePEc:ays:ispwps:paper0406
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