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Tax Effort: The Impact of Corruption, Voice and Accountability

  • Richard M. Bird
  • Jorge Martinez-Vazquez
  • Benno Torgler

In this paper we argue that a more legitimate and responsive state is an essential factor for a more adequate level of tax effort in developing countries. While at first glance giving such advice to poor countries seeking to increase their tax ratios may not seem more helpful than telling them to find oil, it is presumably more feasible for people to improve their governing institutions than to rearrange nature?s bounty. Improving corruption, voice and accountability may not take longer nor be necessarily more difficult than changing the opportunities for tax handles and economic structure. The key contribution of this paper is to extend the conventional model of tax effort by showing that not only do supply factors matter, but that demand factors such as corruption, voice and accountability also determine tax effort to a significant extent.

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Paper provided by Center for Research in Economics, Management and the Arts (CREMA) in its series CREMA Working Paper Series with number 2007-13.

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Date of creation: Jul 2007
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Handle: RePEc:cra:wpaper:2007-13
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  1. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1998. "The Quality of Goverment," NBER Working Papers 6727, National Bureau of Economic Research, Inc.
  2. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2008. "Societal Institutions and Tax Effort in Developing Countries," CEMA Working Papers 582, China Economics and Management Academy, Central University of Finance and Economics.
  3. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
  4. Richard M. Bird, 2014. "Administrative Dimensions of Tax Reform," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 963-992, November.
  5. Lindert, Peter H., 2003. "Voice and Growth: Was Churchill Right?," The Journal of Economic History, Cambridge University Press, vol. 63(02), pages 315-350, June.
  6. Messere, Ken & de Kam, Flip & Heady, Christopher, 2003. "Tax Policy: Theory and Practice in OECD Countries," OUP Catalogue, Oxford University Press, number 9780199241484, December.
  7. Chen, Martha Alter, 2005. "Rethinking the Informal Economy: Linkages with the Formal Economy and the Formal Regulatory Environment," Working Paper Series RP2005/10, World Institute for Development Economic Research (UNU-WIDER).
  8. Hettich,Walter & Winer,Stanley L., 1999. "Democratic Choice and Taxation," Cambridge Books, Cambridge University Press, number 9780521622912, September.
  9. Jorge Martinez-Vazquez, 2001. "Mexico: An Evaluation of the Main Features of the Tax System," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0112, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  10. Best, Michael H., 1976. "Political power and tax revenues in Central America," Journal of Development Economics, Elsevier, vol. 3(1), pages 49-82, March.
  11. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 1-37.
  12. Peter Lindert, 2004. "Social Spending and Economic Growth," Challenge, M.E. Sharpe, Inc., vol. 47(4), pages 6-16, July.
  13. Richard M. bird, 2003. "Taxation in Latin America: Reflections on Sustainability and the Balance between Equity and Efficiency," International Tax Program Papers 0306, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
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