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Taxation and Development: What Have We Learned from Fifty Years of Research?

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  • Bird, Richard M.

Abstract

This paper considers how economic thinking about taxation in developing countries has changed over the last half century. It suggests that three different ‘models’ of development taxation may be discerned over this period. The key element in the first model, which was derived from the dominant public finance literature in the 1950s and 1960s, was the introduction of a comprehensive progressive personal income tax. Experience proved that this approach was not very useful. Fortunately, increased knowledge of the reality of conditions in developing countries, combined with post-1970 theoretical and empirical studies of taxation, soon led to the emergence of a second model for development taxation, centered on a broad-based VAT and much lower rate income taxes, both personal and corporate. While there is still much to be said for this model, more recent investigations of the political and administrative as well as economic dimensions of tax systems in developing countries have led to the gradual emergence of a third ‘model’ – or, perhaps better, framework – for development taxation. Unlike the earlier approaches, this approach focuses on the need to ‘custom build’ the different components of the tax system as well as the system as a whole and emphasizes the extent to which sustainable reforms must be developed ‘in house’ by countries themselves.
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  • Bird, Richard M., 2013. "Taxation and Development: What Have We Learned from Fifty Years of Research?," Working Papers 11255, Institute of Development Studies, International Centre for Tax and Development.
  • Handle: RePEc:idq:ictduk:11255
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    File URL: https://opendocs.ids.ac.uk/opendocs/handle/123456789/11255
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    References listed on IDEAS

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    1. Bird,Richard & Gendron,Pierre-Pascal, 2011. "The VAT in Developing and Transitional Countries," Cambridge Books, Cambridge University Press, number 9781107401440, August.
    2. N. Gregory Mankiw & Matthew Weinzierl & Danny Yagan, 2009. "Optimal Taxation in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 23(4), pages 147-174, Fall.
    3. Alvin Rabushka, 2008. "Introduction to Taxation in Colonial America," Introductory Chapters,in: Taxation in Colonial America Princeton University Press.
    4. Bahl, Roy W. & Bird, Richard M., 2008. "Tax Policy in Developing Countries: Looking Back—and Forward," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(2), pages 279-301, June.
    5. Jorge Martinez-Vazquez & Richard M. Bird, 2011. "Value-Added Tax: Onward and Upward?," Chapters,in: The Elgar Guide to Tax Systems, chapter 6 Edward Elgar Publishing.
    6. Bird, Richard M. & Zolt, Eric M., 2005. "The limited role of the personal income tax in developing countries," Journal of Asian Economics, Elsevier, vol. 16(6), pages 928-946, December.
    7. Breton,Albert, 1996. "Competitive Governments," Cambridge Books, Cambridge University Press, number 9780521481021, August.
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    Cited by:

    1. repec:eee:wdevel:v:105:y:2018:i:c:p:13-24 is not listed on IDEAS
    2. Moore, Mick, 2014. "Revenue Reform and Statebuilding in Anglophone Africa," World Development, Elsevier, vol. 60(C), pages 99-112.
    3. Fjeldstad, Odd-Helge, 2013. "Taxation and Development : a Review of Donor Support to Strengthen Tax Systems in Developing Countries," WIDER Working Paper Series 010, World Institute for Development Economic Research (UNU-WIDER).
    4. Leonce Ndikumana, 2014. "International Tax Cooperation and Implications of Globalization," CDP Background Papers 024, United Nations, Department of Economics and Social Affairs.
    5. repec:taf:rehdxx:v:32:y:2017:i:1:p:37-70 is not listed on IDEAS

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    Keywords

    Economic Development;

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