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On the Political Economy Determinants of Tax Reforms: Evidence from Developing Countries

Author

Listed:
  • Sanjeev Gupta

    (Center for Global Development)

  • João Tovar Jalles

    (Instituto Superior de Economia e Gestão Universidade de Lisboa)

Abstract

This paper analyzes the role of political variables in the implementation of structural tax reforms in 45 emerging market and low-income economies during 2000-2015. The existing literature identifies several hypotheses that drive reforms, but empirical studies that support these hypotheses are lacking. Relying on a new database of structural tax reforms and on binary-type models, our results suggest that a left-wing government is less inclined to implement tax reforms while both proximity to elections and political strength or cohesion are positively associated with tax reforms. The influence of the left government is stronger in low-income than in emerging market economies and revenue administration reforms are resisted the most by such governments. Proximity to elections seems to trigger reforms of personal income tax (PIT) but opposite holds for trade tax reforms. Political cohesion is a necessary ingredient to reform most tax categories and revenue administration.

Suggested Citation

  • Sanjeev Gupta & João Tovar Jalles, 2020. "On the Political Economy Determinants of Tax Reforms: Evidence from Developing Countries," Policy Papers 199, Center for Global Development.
    • Handle: RePEc:cgd:ppaper:199
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    Cited by:

    1. Antonio C. David & Can Sever, 2024. "Electoral cycles in tax reforms," Empirical Economics, Springer, vol. 67(2), pages 495-529, August.
    2. Dobrota Gabriela & Dan Nicoleta & Popa Daniela, 2024. "How Tax Policies Shape Investment Decisions In Emerging Economies," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 57-62, December.
    3. Maya Hammad & Fabianna Bacil & Fábio Veras Soares, 2021. "Next Practices—Innovations in the COVID-19 social protection responses and beyond," Research Report 60, International Policy Centre.
    4. Salih BARIŞIK & Kubilay ERGEN, 2023. "Heterogenous Effects of the Determinants of Pro-market Reforms: Panel Quantile Estimation for OECD Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 36-51, June.
    5. Sèna Kimm Gnangnon, 2023. "Trade costs and tax transition reform in developing countries," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(4), pages 941-977, October.

    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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