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Subnational Taxes in Developing Countries: The Way Forward


  • Richard M. Bird

    (University of Toronto)

  • Roy Bahl

    (University of Toronto
    Georgia State University)


This paper reviews the literature and evidence on the most appropriate structure of regional and local taxes in developing countries. A good subnational tax system is critical to an effective and sustainable system of intergovernmental fiscal relations – a need that has become increasingly important around the world as more and more public services are being delivered through subnational governments. In most developing countries potentially sound and productive taxes exist that are suitable for regional and local governments: property taxes, taxes on motor vehicles, surcharges on national personal income taxes, payroll taxes, and even, in some cases, regional value added taxes and properly designed local business taxes.

Suggested Citation

  • Richard M. Bird & Roy Bahl, 2008. "Subnational Taxes in Developing Countries: The Way Forward," Working Papers Series 16, Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto, revised Aug 2008.
  • Handle: RePEc:ttp:iibwps:16

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    Cited by:

    1. Cristian Sepulveda & Jorge Martinez-Vazquez, 2012. "Explaining property tax collections in developing countries: the case of Latin America," Chapters,in: Decentralization and Reform in Latin America, chapter 7, pages iii-iii Edward Elgar Publishing.
    2. repec:eee:wdevel:v:106:y:2018:i:c:p:173-186 is not listed on IDEAS
    3. Levin, Mark & Matrosova, Kseniya, 2017. "Development and Analysis of Economic Models of Innovation Incentives," Working Papers 061713, Russian Presidential Academy of National Economy and Public Administration.
    4. Jorge Martinez-Vazquez & Cristian Sepulveda, 2012. "Intergovernmental transfers: a policy reform perspective," Chapters,in: Decentralization and Reform in Latin America, chapter 9, pages iii-iii Edward Elgar Publishing.
    5. Roy Kelly, 2014. "Implementing sustainable property tax reform in developing countries," Chapters,in: Taxation and Development: The Weakest Link?, chapter 10, pages 326-363 Edward Elgar Publishing.
    6. GholamReza Zandi & Abdulrahman Sultan M. Elwahi, 2016. "Tax Compliance Audit: The Perspectives of Tax Auditors in Malaysia," Asian Development Policy Review, Asian Economic and Social Society, vol. 4(4), pages 143-149, December.
    7. Roy Bahl, 2014. "A retrospective on taxation in developing countries: Will the weakest link be strengthened?," Chapters,in: Taxation and Development: The Weakest Link?, chapter 12, pages 405-442 Edward Elgar Publishing.
    8. Jaime Alfredo Bonet & Fabio Rueda, 2012. "Esfuerzo fiscal en los estados mexicanos," IDB Publications (Working Papers) 64598, Inter-American Development Bank.
    9. Jorge Martinez-Vazquez & Cristian Sepulveda, 2012. "Toward a More General Theory of Revenue Assignments," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1231, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    10. Roy Bahl, 2017. "Metropolitan city finances in Asia and the Pacific region: issues, problems and reform options," MPDD Working Paper Series WP/17/04, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    11. Catherine Althaus & Lindsay M. Tedds & Allen McAvoy, 2011. "The Feasibility of Implementing a Congestion Charge on the Halifax Peninsula: Filling the "Missing Link" of Implementation," Canadian Public Policy, University of Toronto Press, vol. 37(4), pages 541-561, December.
    12. Ligia Alba Melo-Becerra, 2016. "Sub-national fiscal policy under cooperative and non-cooperative models," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID, vol. 35(Especial ), pages 253-279, January.
    13. Odd-Helge Fjeldstad & Kari Heggstad, 2012. "Local government revenue mobilisation in Anglophone Africa," CMI Working Papers 6, CMI (Chr. Michelsen Institute), Bergen, Norway.
    14. Gwilliam, Kenneth, 2013. "Cities on the move – Ten years after," Research in Transportation Economics, Elsevier, vol. 40(1), pages 3-18.
    15. Bird, Richard, 2010. "Taxation and Decentralization," World Bank - Economic Premise, The World Bank, issue 38, pages 1-5, November.
    16. Jeongwan Kim, 2014. "Intergovernmental Distribution of VAT Revenue in Korea: Local Consumption Tax," Korean Economic Review, Korean Economic Association, vol. 30, pages 109-131.
    17. Paolo Liberati & Agnese Sacchi, 2013. "Tax decentralization and local government size," Public Choice, Springer, vol. 157(1), pages 183-205, October.
    18. Olga Buzu, 2014. "Development of Ad Valorem Real Property Taxation System in Moldova," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 2(3), pages 79-88.
    19. Takaaki Masaki, 2016. "The impact of intergovernmental transfers on local revenue generation in Africa Evidence from Tanzania," WIDER Working Paper Series 113, World Institute for Development Economic Research (UNU-WIDER).
    20. Ligia Alba Melo-Becerra, 2015. "The role of the sub-national public sector in the stabilization function: Evidence from the Colombian case for the period 1990-2001," REVISTA FINANZAS Y POLÍTICA ECONÓMICA, UNIVERSIDAD CATOLICA DE COLOMBIA, vol. 7(2), pages 299-324, July.
    21. Jaime Bonet Moron & Fabio Rueda Devivero, 2013. "Esfuerzo fiscal municipal en Guatemala," REVISTA ECONOMÍA & REGIÓN, UNIVERSIDAD TECNOLÓGICA DE BOLÍVAR, vol. 7(2), pages 5-41, December.
    22. Germán Ríos & Federico Ortega & J. Sebastián Scrofina, 2012. "Sub-national Revenue Mobilization in Latin America and Caribbean Countries: The Case of Venezuela," IDB Publications (Working Papers) 4052, Inter-American Development Bank.
    23. James Alm, 2015. "Financing Urban Infrastructure: Knowns, Unknowns, And A Way Forward," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 230-262, April.
    24. Jorge Martinez-Vazquez & Cristian Sepúlveda, 2011. "Intergovernmental Transfers in Latin America: A Policy Reform Perspective," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1108, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

    More about this item


    local taxes; regional taxes; fiscal decentralization;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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