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Measuring Tax Administration Effectiveness and its Impact on Tax Revenue

Author

Listed:
  • Arindam Das-Gupta

    (Goa Institute of Management, Goa, India)

  • Gemma B. Estrada

    (Asian Development Bank, Manila, Philippines)

  • Donghyun Park

    (Asian Development Bank, Manila, Philippines)

Abstract

We propose a method for constructing a tax administration measure of effectiveness or TAME, and describe its desirable properties. We then empirically construct a TAME using data from external audits of VAT administrations of Indian state governments. We then use the TAME to quantitatively assess the impact of tax administration effectiveness on tax revenues. The impact is found to be both statistically significant and large. We then identify causes of tax administration effectiveness in the poorly performing states. We then suggest guidelines for constructing our TAMEs for other jurisdictions and time periods.

Suggested Citation

  • Arindam Das-Gupta & Gemma B. Estrada & Donghyun Park, 2016. "Measuring Tax Administration Effectiveness and its Impact on Tax Revenue," Economic Growth Centre Working Paper Series 1601, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
  • Handle: RePEc:nan:wpaper:1601
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    References listed on IDEAS

    as
    1. Michael Keen, 2013. "The Anatomy of the Vat," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(2), pages 423-446, June.
    2. Gil S. Epstein & Ira N. Gang, 2010. "Why Pay Taxes When No One Else Does?," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 374-385, May.
    3. Das-Gupta, Arindam & Lahiri, Radhika & Mookherjee, Dilip, 1995. "Income tax compliance in India: An empirical analysis," World Development, Elsevier, vol. 23(12), pages 2051-2064, December.
    4. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-373, August.
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    Cited by:

    1. Gil S. Epstein & Ira N. Gang, 2019. "Inequality, good governance, and endemic corruption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 999-1017, October.
    2. Sacchidananda Mukherjee, 2017. "Changing Tax Capacity and Tax Effort of Indian States in the Era of High Economic Growth, 2001-2014," Working Papers id:11770, eSocialSciences.

    More about this item

    Keywords

    tax administration; tax revenues; value-added tax;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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