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Expanding taxable capacity and reaching revenue potential : cross-country analysis

Author

Listed:
  • Le, Tuan Minh
  • Moreno-Dodson, Blanca
  • Rojchaichaninthorn, Jeep

Abstract

An effective tax system is fundamental for successful country development. The first step to understand public revenue systems is to establish some commonly agreed performance measurements and benchmarks. This paper employs a cross-country study to estimate tax capacity from a sample of 104 countries during 1994-2003. The estimation results are then used as benchmarks to compare taxable capacity and tax effort in different countries. Taxable capacity refersto the predicted tax-gross domestic product ratio that can be estimated with the regression, taking into account a country's specific economic, demographic, and institutional features. Tax effort is defined as an index of the ratio between the share of the actual tax collection in gross domestic product and the predicted taxable capacity. The authors classify countries into four distinct groups by their level of actual tax collection and attained tax effort. This classification is based on the benchmark of the global average of tax collection and a tax effort index of 1 (when tax collection is exactly the same as the estimated taxable capacity). The analysis provides guidance for countries with various levels of tax collection and tax effort.

Suggested Citation

  • Le, Tuan Minh & Moreno-Dodson, Blanca & Rojchaichaninthorn, Jeep, 2008. "Expanding taxable capacity and reaching revenue potential : cross-country analysis," Policy Research Working Paper Series 4559, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4559
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    Citations

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    Cited by:

    1. Gangadha Prasad Shukla & Duc Minh Pham & Michael Engelschalk & Tuan Minh Le, 2011. "Tax Reform in Vietnam," World Bank Other Operational Studies 26851, The World Bank.
    2. Nihal Bayraktar & Tuan Minh Le & Blanca Moreno-Dodson, 2012. "Tax Capacity and Tax Effort: Extended Cross-Country Analysis from 1994 to 2009," EcoMod2012 3858, EcoMod.
    3. Attiya Y. Javid & Umaima Arif, 2012. "Analysis of Revenue Potential and Revenue Effort in Developing Asian Countries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 365-380.
    4. Rolando Ossowski & Alberto Gonzáles-Castillo, 2012. "Manna from Heaven: The Impact of Nonrenewable Resource Revenues on Other Revenues of Resource Exporters in Latin America and the Caribbean," IDB Publications (Working Papers) 4045, Inter-American Development Bank.
    5. World Bank, 2011. "Republic of Armenia - Fiscal Consolidation and Recovery : Synthesis Report," World Bank Other Operational Studies 2807, The World Bank.
    6. Aisha Ghaus Pasha, 2010. "Can Pakistan Get Out of the Low Tax-to-GDP Trap?," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(Special E), pages 171-185, September.

    More about this item

    Keywords

    Taxation&Subsidies; Debt Markets; Public Sector Economics&Finance; Emerging Markets; Economic Theory&Research;

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