IDEAS home Printed from https://ideas.repec.org/a/eee/soceps/v80y2022ics0038012121001464.html
   My bibliography  Save this article

Performance of tax simplification around the world: A panel frontier analysis

Author

Listed:
  • Nguyen, Trang Thi Thuy
  • Pham, Binh Thai
  • Prior, Diego
  • van Hemmen, Stefan

Abstract

A complex tax system may affect the ease of doing business in a specific country through rising fixed cost and the opportunity cost of taxpayers' time, thus constituting a barrier to foreign direct investment and entrepreneurship. This study observes the tax competitiveness in its tax complexity dimension, by covering 88 countries over timespan 2005–2016 and proposing the panel data nonparametric frontier method [1,2] for the model without explicit output (hereafter, panel data DEA-WEO). A thorough view on tax simplification performance was conducted by measuring the efficiency (both contemporaneous and long-run analysis), which allows producing a ranking, and examining the productivity change of these tax systems. Findings show the uptrend of tax systems' relative efficiency through years, from 31.2% (2005) to 52.6% (2016), along with an increasing convergence of the tax simplification trend. Switzerland was found to be the most efficient country, considering long-run performance; however, Norway appeared to have the most feasible practice and model in the segment. It was also found that the average productivity progress of tax simplification for both periods, 2006–2011 and 2011–2016, was 27.7% and 19.6%, respectively. The robustness analysis finds the positive impact of some macro environment-related factors on tax simplification performance, consolidating and validating the tax competitiveness insight of these tax systems.

Suggested Citation

  • Nguyen, Trang Thi Thuy & Pham, Binh Thai & Prior, Diego & van Hemmen, Stefan, 2022. "Performance of tax simplification around the world: A panel frontier analysis," Socio-Economic Planning Sciences, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:soceps:v:80:y:2022:i:c:s0038012121001464
    DOI: 10.1016/j.seps.2021.101154
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0038012121001464
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.seps.2021.101154?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Liu, W.B. & Zhang, D.Q. & Meng, W. & Li, X.X. & Xu, F., 2011. "A study of DEA models without explicit inputs," Omega, Elsevier, vol. 39(5), pages 472-480, October.
    2. Pérez-López, Gemma & Prior, Diego & Zafra-Gómez, José L., 2018. "Temporal scale efficiency in DEA panel data estimations. An application to the solid waste disposal service in Spain," Omega, Elsevier, vol. 76(C), pages 18-27.
    3. Worthington, Andrew C. & Zelenyuk, Valentin, 2018. "Data envelopment analysis, truncated regression and double-bootstrap for panel data with application to Chinese bankingAuthor-Name: Du, Kai," European Journal of Operational Research, Elsevier, vol. 265(2), pages 748-764.
    4. Cuccia, Andrew D. & Carnes, Gregory A., 2001. "A closer look at the relation between tax complexity and tax equity perceptions," Journal of Economic Psychology, Elsevier, vol. 22(2), pages 113-140, April.
    5. Lovell, C. A. Knox & Pastor, Jesus T., 1999. "Radial DEA models without inputs or without outputs," European Journal of Operational Research, Elsevier, vol. 118(1), pages 46-51, October.
    6. Jordi Surroca & Diego Prior & Josep A. Tribó Giné, 2016. "Using panel data dea to measure CEOs' focus of attention: An application to the study of cognitive group membership and performance," Strategic Management Journal, Wiley Blackwell, vol. 37(2), pages 370-388, February.
    7. Kirchler, Erich & Niemirowski, Apolonia & Wearing, Alexander, 2006. "Shared subjective views, intent to cooperate and tax compliance: Similarities between Australian taxpayers and tax officers," Journal of Economic Psychology, Elsevier, vol. 27(4), pages 502-517, August.
    8. Keen, Michael & Slemrod, Joel, 2017. "Optimal tax administration," Journal of Public Economics, Elsevier, vol. 152(C), pages 133-142.
    9. Pontus Braunerhjelm & Johan E. Eklund, 2014. "Taxes, tax administrative burdens and new firm formation," Kyklos, Wiley Blackwell, vol. 67(1), pages 1-11, February.
    10. Knox Lovell, C. A. & Pastor, Jesus T. & Turner, Judi A., 1995. "Measuring macroeconomic performance in the OECD: A comparison of European and non-European countries," European Journal of Operational Research, Elsevier, vol. 87(3), pages 507-518, December.
    11. Simeon Djankov & Tim Ganser & Caralee McLiesh & Rita Ramalho & Andrei Shleifer, 2010. "The Effect of Corporate Taxes on Investment and Entrepreneurship," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 31-64, July.
    12. Mills, Lillian F., 1996. "Corporate Tax Compliance and Financial Reporting," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(3), pages 421-433, September.
    13. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    14. Russell G. Thompson & F. D. Singleton & Robert M. Thrall & Barton A. Smith, 1986. "Comparative Site Evaluations for Locating a High-Energy Physics Lab in Texas," Interfaces, INFORMS, vol. 16(6), pages 35-49, December.
    15. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
    16. Färe, Rolf & Karagiannis, Giannis, 2014. "Benefit-of-the-doubt aggregation and the diet problem," Omega, Elsevier, vol. 47(C), pages 33-35.
    17. Mr. Junji Ueda, 2017. "The Evolution of Potential VAT Revenues and C-Efficiency in Advanced Economies," IMF Working Papers 2017/158, International Monetary Fund.
    18. Karagiannis, Roxani & Karagiannis, Giannis, 2018. "Intra- and inter-group composite indicators using the BoD model," Socio-Economic Planning Sciences, Elsevier, vol. 61(C), pages 44-51.
    19. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
    20. Tracy Oliver & Scott Bartley, 2005. "Tax system complexity and compliance costs — some theoretical considerations," Economic Roundup, The Treasury, Australian Government, issue 3, pages 53-68, September.
    21. A Zanella & A S Camanho & T G Dias, 2013. "Benchmarking countries’ environmental performance," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 64(3), pages 426-438, March.
    22. Kate Krause, 2000. "Tax Complexity: Problem or Opportunity?," Public Finance Review, , vol. 28(5), pages 395-414, September.
    23. Mehdi Toloo & Madjid Tavana, 2017. "A novel method for selecting a single efficient unit in data envelopment analysis without explicit inputs/outputs," Annals of Operations Research, Springer, vol. 253(1), pages 657-681, June.
    24. Tom Puyenbroeck, 2018. "On the Output Orientation of the Benefit-of-the-Doubt-Model," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(2), pages 415-431, September.
    25. Zelenyuk, Valentin, 2006. "Aggregation of Malmquist productivity indexes," European Journal of Operational Research, Elsevier, vol. 174(2), pages 1076-1086, October.
    26. James Alm & Denvil Duncan, 2014. "Estimating Tax Agency Efficiency," Public Budgeting & Finance, Wiley Blackwell, vol. 34(3), pages 92-110, September.
    27. Rick Weber, 2015. "The Effect of Tax Code Complexity on Entrepreneurship," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 30(Summer 20), pages 83-102.
    28. Deniz Igan & Zhibo Tan, 2017. "Capital Inflows, Credit Growth, and Financial Systems," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(12), pages 2649-2671, December.
    29. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    30. Mr. John D Brondolo, 2009. "Collecting Taxes During an Economic Crisis: Challenges and Policy Options," IMF Staff Position Notes 2009/017, International Monetary Fund.
    31. Martina Lawless, 2013. "Do Complicated Tax Systems Prevent Foreign Direct Investment?," Economica, London School of Economics and Political Science, vol. 80(317), pages 1-22, January.
    32. Laurens Cherchye & Willem Moesen & Nicky Rogge & Tom Puyenbroeck, 2007. "An Introduction to ‘Benefit of the Doubt’ Composite Indicators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 82(1), pages 111-145, May.
    33. Nihal Bayraktar, 2020. "Impact of Tax Simplification on Tax Efficiency," Springer Proceedings in Business and Economics, in: Nicholas Tsounis & Aspasia Vlachvei (ed.), Advances in Cross-Section Data Methods in Applied Economic Research, chapter 0, pages 229-258, Springer.
    34. Scotchmer, Suzanne, 1989. "Who profits from taxpayer confusion?," Economics Letters, Elsevier, vol. 29(1), pages 49-55.
    35. Li, Qi & Maasoumi, Esfandiar & Racine, Jeffrey S., 2009. "A nonparametric test for equality of distributions with mixed categorical and continuous data," Journal of Econometrics, Elsevier, vol. 148(2), pages 186-200, February.
    36. Guoliang Yang & Wanfang Shen & Daqun Zhang & Wenbin Liu, 2014. "Extended utility and DEA models without explicit input," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 65(8), pages 1212-1220, August.
    37. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
    38. Rajul Awasthi & Nihal Bayraktar, 2015. "Can tax simplification help lower tax corruption?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 297-330, December.
    39. Karagiannis, Giannis & Knox Lovell, C.A., 2016. "Productivity measurement in radial DEA models with a single constant input," European Journal of Operational Research, Elsevier, vol. 251(1), pages 323-328.
    40. Nguyen, Trang T.T. & Prior, Diego & Van Hemmen, Stefan, 2020. "Stochastic semi-nonparametric frontier approach for tax administration efficiency measure: Evidence from a cross-country study," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 137-153.
    41. Ms. Cemile Sancak & Jing Xing & Ricardo Velloso, 2010. "Tax Revenue Response to the Business Cycle," IMF Working Papers 2010/071, International Monetary Fund.
    42. Alm, James, 1996. "What Is an "Optimal'"Tax System?," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(1), pages 117-133, March.
    43. Alm, James, 1996. "What Is an "Optimal'"Tax System?," National Tax Journal, National Tax Association, vol. 49(1), pages 117-33, March.
    44. Mills, Lillian F., 1996. "Corporate Tax Compliance and Financial Reporting," National Tax Journal, National Tax Association, vol. 49(3), pages 421-33, September.
    45. John Brondolo, 2009. "Collecting Taxes During an Economic Crisis; Challenges and Policy Options," IMF Staff Position Notes 2009/17, International Monetary Fund.
    46. Binh Tran‐Nam & Chris Evans, 2014. "Towards the Development of a Tax System Complexity Index," Fiscal Studies, Institute for Fiscal Studies, vol. 35, pages 341-370, September.
    47. D K Despotis, 2005. "A reassessment of the human development index via data envelopment analysis," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(8), pages 969-980, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Rajul Awasthi & Nihal Bayraktar, 2015. "Can tax simplification help lower tax corruption?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 297-330, December.
    3. Giménez, Víctor & Thieme, Claudio & Prior, Diego & Tortosa-Ausina, Emili, 2022. "Evaluation and determinants of preschool effectiveness in Chile," Socio-Economic Planning Sciences, Elsevier, vol. 81(C).
    4. Awasthi, Rajul & Bayraktar, Nihal, 2014. "Can tax simplification help lower tax corruption ?," Policy Research Working Paper Series 6988, The World Bank.
    5. Tom Puyenbroeck, 2018. "On the Output Orientation of the Benefit-of-the-Doubt-Model," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(2), pages 415-431, September.
    6. Deogratius Mahangila & Wineaster Anderson, 2017. "Tax Administrative Burdens in the Tourism Sector in Zanzibar: Stakeholders’ Perspectives," SAGE Open, , vol. 7(4), pages 21582440177, October.
    7. Nihal Bayraktar, 2016. "Tax simplification and tax efficiency," EcoMod2016 9100, EcoMod.
    8. Vincenzo Patrizii & Anna Pettini & Giuliano Resce, 2017. "The Cost of Well-Being," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(3), pages 985-1010, September.
    9. Karagiannis, Giannis & Knox Lovell, C.A., 2016. "Productivity measurement in radial DEA models with a single constant input," European Journal of Operational Research, Elsevier, vol. 251(1), pages 323-328.
    10. Fusco, Elisa & Vidoli, Francesco & Rogge, Nicky, 2020. "Spatial directional robust Benefit of the Doubt approach in presence of undesirable output: An application to Italian waste sector," Omega, Elsevier, vol. 94(C).
    11. Sahoo, Biresh K. & Singh, Ramadhar & Mishra, Bineet & Sankaran, Krithiga, 2017. "Research productivity in management schools of India during 1968-2015: A directional benefit-of-doubt model analysis," Omega, Elsevier, vol. 66(PA), pages 118-139.
    12. Karagiannis, Roxani & Karagiannis, Giannis, 2018. "Intra- and inter-group composite indicators using the BoD model," Socio-Economic Planning Sciences, Elsevier, vol. 61(C), pages 44-51.
    13. Ravanos, Panagiotis & Karagiannis, Giannis, 2022. "Tricks with the BoD model and an application to the e-Government Development Index," Socio-Economic Planning Sciences, Elsevier, vol. 81(C).
    14. Juan Piedra-Peña & Diego Prior, 2023. "Analyzing the effect of health reforms on the efficiency of Ecuadorian public hospitals," International Journal of Health Economics and Management, Springer, vol. 23(3), pages 361-392, September.
    15. Giannis Karagiannis, 2017. "On aggregate composite indicators," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(7), pages 741-746, July.
    16. Jesús Peiró-Palomino & Andrés J. Picazo-Tadeo, 2018. "Assessing well-being in European regions. Does government quality matter?," Working Papers 2018/06, Economics Department, Universitat Jaume I, Castellón (Spain).
    17. Francesco Berardini & Fabrizio Renzi, 2022. "Mind the Gap! The (unexpected) impact of COVID-19 pandemic on VAT revenue in Italy," Questioni di Economia e Finanza (Occasional Papers) 669, Bank of Italy, Economic Research and International Relations Area.
    18. Gulati, Rachita & Charles, Vincent & Kumar, Sunil, 2024. "School education development index: A meta-frontier range directional measure benefit-of-the-doubt model," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).
    19. Fernández-Macho, Javier & González, Pilar & Virto, Jorge, 2016. "An index to assess maritime importance in the European Atlantic economy," Marine Policy, Elsevier, vol. 64(C), pages 72-81.
    20. Cesaroni, Giovanni & Kerstens, Kristiaan & Van de Woestyne, Ignace, 2019. "Short- and long-run plant capacity notions: Definitions and comparison," European Journal of Operational Research, Elsevier, vol. 275(1), pages 387-397.

    More about this item

    Keywords

    Tax complexity; Tax simplification; Panel data DEA; DEA-WEO; Tax competitiveness; OECD;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:soceps:v:80:y:2022:i:c:s0038012121001464. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/seps .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.