New approaches to measuring tax effort

Cyan, Musharraf; Martínez-Vázquez, Jorge; Vulovic, Violeta

doi:10.4337/9781783474332.00008

Cited by 11 publications

(22 citation statements)

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“…When considering the inflation rate, it also tends to enhance fiscal space, but its effect is not statistically significant in our preferred model 3 of debt service to tax ratio and is only significant at 10 per cent in the third specification of the tax-to-GDP model. Furthermore, general government consumption does not support the argument of Cyan et al (2013). The insignificance of this result could be explained by the non-inclusion of the other categories of government expenditure including investment that could exert pressure on debt and tax revenues.…”

Section: Dependent Variablementioning

confidence: 68%

Corruption, tax reform and fiscal space in emerging and developing economies

Yohou

2023

World Economy

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Several studies have demonstrated that corruption hinders efforts in enhancing public revenue and fiscal space through different channels. This paper assesses the effect of tax reform on fiscal space conditional on corruption control for a large panel of developing and emerging economies over 1990-2016. Using a threshold approach, our findings indicate that tax reform effect on fiscal space is not monotonic and depends on corruption control. Tax reform enhances fiscal space and tax revenue when corruption control is better. The results also suggest that heterogeneity across countries and time does matter. Individual estimates of elasticity of fiscal space to tax reform support evidence that countries that benefit most from tax reform are those that prove enough ability to control corruption.

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Section: Dependent Variablementioning

confidence: 68%

Corruption, tax reform and fiscal space in emerging and developing economies

Yohou

2023

World Economy

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“…For instance, Fenochietto and Pessino (2013) estimate a tax effort of around 70%, 80%, 57%, 45%, and 7% in Argentina, Brazil, Colombia, Indonesia, and Saudi Arabia, respectively. On the other hand, Cyan, Martinez-Vazquez and Vulovic (2013) and Le, Moreno-Dodson and Bayraktar (2012) use a similar stochastic frontier analysis, but found across-the-board higher tax effort percentages for their sample of countries. Also, in our view Brun and Diakite (2016) makes one of the few efforts to estimate tax effort and attempt to disentangle time-varying inefficiency from the time-invariant one in relation to policy decisions.…”

Section: Resultsmentioning

confidence: 94%

“…In this line, Bird, Martinez-Vazquez and Torgler (2008) study that institutional factors such as perception of corruption, voice and accountability are as important as supply factors in explaining tax effort in developing and high income countries. On another contribution, Cyan, Martinez-Vazquez and Vulovic (2013) explore different approaches and conclude that any attempt to estimate revenue potential taken should depend upon a country’s specific developmental needs, budgetary ambitions and feasibility of potential tax reforms; also, they argue that the sufficiency of tax effort should be linked to particular expenditure and welfare gains goals. The authors also attempt to account for time-invariant inefficiency in tax collection.…”

Section: Context and Datamentioning

confidence: 99%

Revisiting tax effort in emerging markets

Canavire‐Bacarreza

Deza

Manzano

et al. 2021

Public Finance Review

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Insufficient tax revenues has been one of the most pervasive restrictions on investment in the social and economic infrastructure needed to close the development gaps in emerging markets (EM). To assess the potential for increasing tax collection, the literature has emphasized the concept of tax capacity and tax effort. Conceptually, tax effort is modeled as an inefficiency term with both time-varying and time-invariant components. These are commonly estimated through OLS or stochastic frontier analysis techniques. However, these strategies provide only point estimates and are limited in their ability to break down tax effort into time-varying and time-invariant components. We estimate tax effort for a balanced panel of 108 countries for which data were available from 2002 to 2017, using a Bayesian strategy that allows us to calculate the invariant inefficiency as an upper bound for a country’s tax effort. We also show that the GTRE model from Tsionas and Kumbhakar (2014 ) allows for more precise estimates, providing powerful tools for more informed fiscal planning.

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“…This approach is applied in research (Alfirman, 2003;Pedraja et al, 2020). These methods have been criticized by Cyan et al (2014) for their lack of connection with national conditions, in particular with the amount of government spending. The comparison of tax revenues and government spending is even more important when analyzing the tax capacity of subnational budgets.…”

Section: Literature Viewmentioning

confidence: 99%