A Theory of Tax Level Determinants for Developing Countries

Lotz, Joergen R.; Morss, Elliott R.

doi:10.1086/450436

Cited by 60 publications

(38 citation statements)

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“…The most commonly used approach is the behavioral approach. The approach was proposed by [27] and [29] to measure tax performance. The approach regresses the tax to GDP ratio on a set of variables that serve as proxies for a country's tax handles.…”

Section: Synthesis Of the Literaturementioning

confidence: 99%

Trade Openness and Tax Revenue Performance in East African Countries

Gaalya¹,

Bbaale²,

Hisali³

2017

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Despite the well-known gains from trade, the effects of trade openness are a priori ambiguous. For this reason it's important to establish the effects of trade openness on different sources of government revenue for any country opening its borders to trade. This study sought to establish the effects of trade openness on different categories of taxes. A panel data cointegration technique that uses the Fully Modified Ordinally Least Squares and Dynamic Ordinally Least Squares were employed. The data are annual cross country panels of East Africa countries covering the period 1994-2012. The data were obtained from the IMF's International Finance Statistics, the African Development Bank's African Economic Outlook and the World Bank's World Development Indicators. We found that the average tariff rate used as a measure for trade openness positively influences total tax, indirect tax and trade tax while the average tariff rate squared is negative, illustrating a "Laffer effect" for the three tax categories. The relationship between trade openness and direct taxes is found to be insignificant. The policy implication is that governments of EAC countries should asymmetrically implement trade openness policies, particularly lowering the tariff rate to help in improving tax performance.

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Section: Synthesis Of the Literaturementioning

confidence: 99%

Trade Openness and Tax Revenue Performance in East African Countries

Gaalya¹,

Bbaale²,

Hisali³

2017

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“…The studies stress the importance of structural factors, international factors and institutional factors in influencing tax revenue performance in these countries. Some of the studies that have attempted to explore the determinants of tax revenue performance include work by [9]- [14]. Despite these studies are very few, studies have paid attention to issues concerning the consequence of trade reforms on erosion of tax bases.…”

Section: Tax Revenue Performancementioning

confidence: 99%

“…The potential tax revenue is generated from the predicted values based on regression analysis. Some early contributions to this discussion were by [13] [14]. Later on, [15] [18] contributed to literature using this approach.…”

Section: Theoretical Literature On Tax Revenue Performancementioning

confidence: 99%

“…Openness has largely been considered a fundamental determinant of taxable capacity by different studies. Among the studies that have presented the importance of openness are studies by Lotz and Morss [14] and Wibbels and Moisés [27]. These studies use the ratio of trade to GDP to estimate the degree of globalization, the level of trade barriers and the extent of a country's foreign trade sector to explain the level of openness among different countries.…”

Section: Choice Of Independent Variablesmentioning

confidence: 99%

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Trade Liberalization and Tax Revenue Performance in Uganda

Gaalya¹

2015

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The study uses fixed and random effects models to establish the determinants of tax revenue performance. The data cover the period 1994 to 2012, with the results suggesting that exchange rates, trade openness and share of industry to GDP positively influence tax revenue performance while the agriculture share to GDP and foreign aid negatively influence tax revenue performance. Importantly the coefficient for trade openness that is used as a proxy for trade liberalization indicates a positive influence on tax revenue performance.

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“…Some early contributions to this discussion also were those of Bahl (1971); Lotz and Mors (1970); Leuthold (1991); Tanzi (1992); Stotsky and WoldeMariam (1997); Ghura (1998); Piancastelli (2001); Eltony (2002) and Gupta (2007). Two versions of the standard regression approach, but of limited reliability, are similarly mentioned in the literature: The income approach, where tax effort is defined as the ratio of actual tax collection to GDP, and the representative tax system (RTS) approach, which requires the identification of close proxies for the tax base corresponding to each tax category (Piancastelli 2001;Purohit 2006).…”

Section: Discussionmentioning

confidence: 95%

A New Approach to Measuring Tax Effort

2019

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This paper attempts to extend the theoretical and empirical methodology employed in previous literature, by proposing a utility maximization process to estimate the optimal tax revenue from a sample of 30 countries. It is shown that an optimal tax system is defined solely by two crucial determining factors: The productive capacity of the country (GDP) and consumers' preferences (consumption spending). All the other variables can be disregarded, as macroeconomic determinants (GDP, consumption) tend to capture the impact of all the remaining factors on tax revenue. It is also shown that our utility maximization method generates tax-effort indices which do not differ significantly from those of IMF and World Bank studies. The actual tax burden for most of the sample countries is shown to be below its optimal level. As expected, the tax-effort performance of each of the sample countries appears to be affected by the variety of approaches employed throughout the text.

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A Theory of Tax Level Determinants for Developing Countries

Cited by 60 publications

References 1 publication

Trade Openness and Tax Revenue Performance in East African Countries

Trade Openness and Tax Revenue Performance in East African Countries

Trade Liberalization and Tax Revenue Performance in Uganda

A New Approach to Measuring Tax Effort

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