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Elections and the structure of taxation in developing countries

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  • Hélène EHRHART

    () (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

Abstract

This paper goes beyond traditional political budget cycles studies by considering the impact of the election calendar on the composition of tax revenue (direct taxes versus indirect taxes) rather than on the global level. We develop a theoretical model, based on Drazen and Eslava (2010) to predict how the taxation structure will be modif i ed during election years. Using a panel of 56 developing countries over 1980-2006, our study reveals clear patterns of electorally timed interventions. We found robust evidence that indirect taxes decreases are the preferred vehicle for incumbents in de veloping countries to increase their popularity just before elections. On average, they are falling of 2.6 percent in an election year while the direct taxes remain unchanged. These manipulations constitute reversals in the developing countries' tax reforms aim- ing at broaden tax bases and increase tax mobilization and point at the importance of both good fiscal institutions and fiscal discipline.

Suggested Citation

  • Hélène EHRHART, 2010. "Elections and the structure of taxation in developing countries," Working Papers 201027, CERDI.
  • Handle: RePEc:cdi:wpaper:1204
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    Cited by:

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    2. Atsuyoshi Morozumi & Francisco José Veiga & Linda Gonçalves Veiga, 2014. "Electoral effects on the composition of public spending and revenue: evidence from a large panel of countries," NIPE Working Papers 23/2014, NIPE - Universidade do Minho.
    3. Pantelis Kammas & Vassilis Sarantides, 2016. "Fiscal redistribution around elections when democracy is not “the only game in town”," Public Choice, Springer, vol. 168(3), pages 279-311, September.
    4. Christian Ebeke & Helene Ehrhart, 2012. "Tax Revenue Instability in Sub-Saharan Africa: Consequences and Remedies," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 21(1), pages 1-27, January.
    5. Foremny, Dirk & Riedel, Nadine, 2014. "Business taxes and the electoral cycle," Journal of Public Economics, Elsevier, vol. 115(C), pages 48-61.
    6. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    7. Antoine Cazals & Pierre Mandon, 2016. "Political Budget Cycles: Manipulation from Leaders or Manipulation from Researchers? Evidence from a Meta-Regression Analysis," Working Papers halshs-01320586, HAL.
    8. Paul Mosley & Blessing Chiripanhura, 2016. "The African Political Business Cycle: Varieties of Experience," Journal of Development Studies, Taylor & Francis Journals, vol. 52(7), pages 917-932, July.
    9. Francisco Jose Veiga & Linda Goncalves Veiga & Atsuyoshi Morozumi, 2015. "Political budget cycles and media freedom," Discussion Papers 2015/14, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    10. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    11. Bharatee Dash & Angara Raja, 2014. "Do political determinants affect revenue collection? Evidence from the Indian states," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(3), pages 253-278, September.
    12. Klomp, Jeroen & de Haan, Jakob, 2016. "Election cycles in natural resource rents: Empirical evidence," Journal of Development Economics, Elsevier, vol. 121(C), pages 79-93.
    13. Mailu, S.K. & Mulinge, W., 2016. "Excise tax changes and their impact on Gadam sorghum demand in Kenya," 2016 AAAE Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 246959, African Association of Agricultural Economists (AAAE).
    14. Prichard, Wilson, 2015. "Reassessing Tax and Development Research: A New Dataset, New Findings, and Lessons for Research," Working Papers 13654, Institute of Development Studies, International Centre for Tax and Development.
    15. Christian H Ebeke & Dilan Ölcer, 2013. "Fiscal Policy over the Election Cycle in Low-Income Countries," IMF Working Papers 13/153, International Monetary Fund.
    16. Prichard, Wilson, 2016. "Reassessing Tax and Development Research: A New Dataset, New Findings, and Lessons for Research," World Development, Elsevier, vol. 80(C), pages 48-60.
    17. Antoine Cazals & Pierre Mandon, 2015. "Political Budget Cycles: Manipulation of Leaders or Bias from Research? A Meta-Regression Analysis," Working Papers halshs-01238883, HAL.
    18. Hélène Ehrhart & Samuel Guerineau, 2012. "Commodity price volatility and Tax revenues: Evidence from developing countries," Working Papers halshs-00658210, HAL.
    19. Antoine CAZALS & Pierre MANDON, 2016. "Political Budget Cycles: Manipulation from Leaders or Manipulation from Researchers? Evidence from a Meta-Regression Analysis," Working Papers 201609, CERDI.
    20. Prichard, Wilson, 2016. "Electoral Competitiveness, Tax Bargaining and Political Incentives in Developing Countries: Evidence from Political Budget Cycles Affecting Taxation," Working Papers 13713, Institute of Development Studies, International Centre for Tax and Development.

    More about this item

    Keywords

    Political budget cycles; Tax structure; Developing countries;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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