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Fiscal Reform and its Firm-Level Effects in Eastern Europe and Central Asia

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  • John E. Anderson

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Abstract

This paper reports the first empirical evidence that fiscal reform efforts in transition countries have positive effects. Using the EBRD BEEPS I and II data, reported in 1999 and 2002, rigorous econometric models are estimated showing that the share of bribes paid to tax collectors is reduced in countries with more extensive fiscal reforms. This effect controls for selection bias in the likelihood that firms are required to make unofficial payments to tax authorities. On the basis of this evidence, we now have some confidence in the success of fiscal reform efforts. In addition, we have insight regarding what forms of fiscal reform may be more successful as the share of revenues generated from direct taxes (both personal and corporate) has an impact on tax bribes.

Suggested Citation

  • John E. Anderson, 2005. "Fiscal Reform and its Firm-Level Effects in Eastern Europe and Central Asia," William Davidson Institute Working Papers Series wp800, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2005-800
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/40186/3/wp800.pdf
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    References listed on IDEAS

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    1. Martinez-Vazquez, Jorge & McNab, Robert M., 2000. "The Tax Reform Experiment in Transitional Countries," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(2), pages 273-298, June.
    2. George C. Tsibouris & Vito Tanzi, 2000. "Fiscal Reform Over Ten Years of Transition," IMF Working Papers 00/113, International Monetary Fund.
    3. repec:rus:hseeco:130396 is not listed on IDEAS
    4. Richard E. Ericson, 1991. "The Classical Soviet-Type Economy: Nature of the System and Implications for Reform," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 11-27, Fall.
    5. John E. Anderson, 2003. "Tax Offsets or Netting Operations in Post-Soviet Public Finance," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 39(3), pages 27-41, May.
    6. Henri Lorie, 2003. "Priorities for Further Fiscal Reforms in the Commonwealth of Independent States," IMF Working Papers 03/209, International Monetary Fund.
    7. Andrei Shleifer & Robert W. Vishny, 1994. "Politicians and Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 995-1025.
    8. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Governance matters," Policy Research Working Paper Series 2196, The World Bank.
    9. Clifford Gaddy & Barry W. Ickes, 1998. "To Restructure or Not to Restructure: Informal Activities and Enterprise Behavior in Transition," William Davidson Institute Working Papers Series 134, William Davidson Institute at the University of Michigan.
    10. Martinez-Vazquez, Jorge & McNab, Robert M., 2000. "The Tax Reform Experiment in Transitional Countries," National Tax Journal, National Tax Association, vol. 53(n. 2), pages 273-98, June.
    11. John E. Anderson & Örn B. Bodvarsson, 2005. "Tax Evasion on Gratuities," Public Finance Review, , vol. 33(4), pages 466-487, July.
    12. Jorge Martinez-Vazquez & Robert McNab, 1997. "Tax Systems in Transition Economics," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9701, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    13. Vahram Stepanyan, 2003. "Reforming Tax Systems; Experience of the Baltics, Russia, and Other Countries of the Former Soviet Union," IMF Working Papers 03/173, International Monetary Fund.
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    Citations

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    Cited by:

    1. Christopher Gerry & Tomasz Marek Mickiewicz, 2007. "Inequality, democracy and taxation: lessons from the post-communist transition," UCL SSEES Economics and Business working paper series 74, UCL School of Slavonic and East European Studies (SSEES).
    2. Christopher Gerry & Tomasz Mickiewicz, 2006. "Inequality, Fiscal Capacity and the Political Regime: Lessons from the Post-Communist Transition," William Davidson Institute Working Papers Series wp831, William Davidson Institute at the University of Michigan.
    3. David Joulfaian, 2009. "Bribes and Business Tax Evasion," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(2), pages 227-244, December.

    More about this item

    Keywords

    Fiscal reform; Bribery; Transition economies; Eastern Europe; Central Asia;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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