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Tax capacity and tax effort : extended cross-country analysis from 1994 to 2009

  • Le, Tuan Minh
  • Moreno-Dodson, Blanca
  • Bayraktar, Nihal
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    One of the important factors for economic development is the existence of an effective tax system. This paper deals with the concept and empirical estimation of countries'taxable capacity and tax effort. It employs a cross-country study from a sample of 110 developing and developed countries during 1994-2009. Taxable capacity refers to the predicted tax-to-gross domestic product ratio that can be estimated empirically, taking into account a country's specific macroeconomic, demographic, and institutional features, which all change through time. Tax effort is defined as an index of the ratio between the share of the actual tax collection in gross domestic product and taxable capacity. The use of tax effort and actual tax collection benchmarks allows the ranking of countries into four different groups: low tax collection, low tax effort; high tax collection, high tax effort; low tax collection, high tax effort; and high tax collection, low tax effort. The analysis provides broad guidance for tax reforms in countries with various levels of taxable capacity and revenue intake.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6252.

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    Date of creation: 01 Oct 2012
    Date of revision:
    Handle: RePEc:wbk:wbrwps:6252
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    1. Fricke, Hans & Süssmuth, Bernd, 2013. "Growth and volatility of tax revenues in Latin America," Working Papers 124, University of Leipzig, Faculty of Economics and Management Science.
    2. Leuthold, Jane H., 1991. "Tax shares in developing economies A panel study," Journal of Development Economics, Elsevier, vol. 35(1), pages 173-185, January.
    3. Schneider, Friedrich & Buehn, Andreas & Montenegro, Claudio E., 2010. "Shadow economies all over the world : new estimates for 162 countries from 1999 to 2007," Policy Research Working Paper Series 5356, The World Bank.
    4. James R. Hines Jr. & Lawrence H. Summers, 2009. "How Globalization Affects Tax Design," NBER Chapters, in: Tax Policy and the Economy, Volume 23, pages 123-157 National Bureau of Economic Research, Inc.
    5. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2004. "Societal Institutions and Tax Effort in Developing Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0406, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    6. Abhijit Sen Gupta, 2007. "Determinants of Tax Revenue Efforts in Developing Countries," IMF Working Papers 07/184, International Monetary Fund.
    7. Morris, Richard & de Castro Fernández, Francisco & Jonk, Steven & Kremer, Jana & Linehan, Suzanne & Marino, Maria Rosaria & Schalck, Christophe & Tkacevs, Olegs, 2009. "Explaining government revenue windfalls and shortfalls: an analysis for selected EU countries," Working Paper Series 1114, European Central Bank.
    8. Rodrik, Dani, 1996. "Why do More Open Economies Have Bigger Governments?," CEPR Discussion Papers 1388, C.E.P.R. Discussion Papers.
    9. Joshua Aizenman & Yothin Jinjarak, 2006. "Globalization and Developing Countries - A Shrinking Tax Base?," NBER Working Papers 11933, National Bureau of Economic Research, Inc.
    10. Vito Tanzi & Hamid Reza Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 97/139, International Monetary Fund.
    11. Isabelle Joumard & Per Mathis Kongsrud, 2003. "Fiscal Relations across Government Levels," OECD Economics Department Working Papers 375, OECD Publishing.
    12. repec:ttp:itpwps:0411 is not listed on IDEAS
    13. repec:cup:cbooks:9780521877657 is not listed on IDEAS
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