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Do institutions advocate tax simplification? Insights from a panel of 88 countries

Author

Listed:
  • Pham Thai Binh

    (University of Economics Ho Chi Minh City)

  • Trang Thi Thuy Nguyen

    (Van Lang University)

Abstract

The complexity of taxes has been widely discussed in the literature and can be defined and measured in various ways depending on one’s perspective. Institutions play a crucial role in shaping the strategic environment and understanding them is crucial in understanding the policy process. When designing taxes, it is vital to consider how institutions influence tax complexity. In this empirical study, we take an institutional approach to examine what extent the institutional quality supports the tax simplification process. Using the system generalised method of moments (system GMM) for a dynamic panel of 88 countries, we show that higher institutional quality seems to be associated with a lower degree of tax complexity, regardless of income levels and legal origins. These findings are robustly consistent across a variety of specifications and institutional measurements. To that end, we make policy recommendations on tax administration.

Suggested Citation

  • Pham Thai Binh & Trang Thi Thuy Nguyen, 2024. "Do institutions advocate tax simplification? Insights from a panel of 88 countries," Economic Change and Restructuring, Springer, vol. 57(3), pages 1-39, June.
    • Handle: RePEc:kap:ecopln:v:57:y:2024:i:3:d:10.1007_s10644-024-09709-7
    DOI: 10.1007/s10644-024-09709-7
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    More about this item

    Keywords

    Tax complexity; Tax simplification; Tax administration; Public governance; Institutional quality; System GMM;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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