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

Author

Listed:
  • Le, Tuan Minh
  • Moreno-Dodson, Blanca
  • Bayraktar, Nihal

Abstract

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.

Suggested Citation

  • Le, Tuan Minh & Moreno-Dodson, Blanca & Bayraktar, Nihal, 2012. "Tax capacity and tax effort : extended cross-country analysis from 1994 to 2009," Policy Research Working Paper Series 6252, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6252
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    References listed on IDEAS

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    2. Joshua Aizenman & Yothin Jinjarak, 2009. "Globalisation and Developing Countries - a Shrinking Tax Base?," Journal of Development Studies, Taylor & Francis Journals, vol. 45(5), pages 653-671.
    3. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2014. "Societal Institutions and Tax Effort in Developing Countries," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 301-351, May.
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    6. Fricke, Hans & Süssmuth, Bernd, 2014. "Growth and Volatility of Tax Revenues in Latin America," World Development, Elsevier, vol. 54(C), pages 114-138.
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    8. Abhijit Sen Gupta, 2007. "Determinants of Tax Revenue Efforts in Developing Countries," IMF Working Papers 07/184, International Monetary Fund.
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    Cited by:

    1. Combes, J.-L. & Combes Motel, P. & Minea, A. & Villieu, P., 2015. "Deforestation and seigniorage in developing countries: A tradeoff?," Ecological Economics, Elsevier, vol. 116(C), pages 220-230.
    2. Hallerberg, Mark & Scartascini, Carlos, 2017. "Explaining changes in tax burdens in Latin America: Do politics trump economics?," European Journal of Political Economy, Elsevier, vol. 48(C), pages 162-179.
    3. Ojijo Odhiambo & Emmanuel Ziramba, 2014. "Domestic Resources for Development Financing In Namibia ? Constraints and Opportunities," Working Papers 127, International Policy Centre for Inclusive Growth.
    4. repec:nam:befdwp:7 is not listed on IDEAS
    5. Marco Committeri & Carola Pessino, 2013. "Understanding Countries’ Tax Effort," IMF Working Papers 13/244, International Monetary Fund.

    More about this item

    Keywords

    Taxation&Subsidies; Subnational Economic Development; Debt Markets; Emerging Markets; Economic Theory&Research;

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