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The quality of tax administration and firm performance: evidence from developing countries

Author

Listed:
  • Era Dabla-Norris

    (International Monetary Fund)

  • Florian Misch

    (International Monetary Fund)

  • Duncan Cleary

    (Revenue Irish Tax and Customs)

  • Munawer Khwaja

Abstract

Tax compliance costs tend to be disproportionately higher for small and young businesses. This paper examines how the quality of tax administration affects firm performance for a large sample of firms in emerging market and developing economies. We construct a novel, internationally comparable, and multidimensional index of tax administration quality (the TAQI) using information from the Tax Administration Diagnostic Assessment Tool. We show that better tax administration attenuates the productivity gap of small and young firms relative to larger and older firms, a result that is robust to controlling for other aspects of tax policy and of economic governance, alternative definitions of small and young firms, and measures of the quality of tax administration.

Suggested Citation

  • Era Dabla-Norris & Florian Misch & Duncan Cleary & Munawer Khwaja, 2020. "The quality of tax administration and firm performance: evidence from developing countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(3), pages 514-551, June.
    • Handle: RePEc:kap:itaxpf:v:27:y:2020:i:3:d:10.1007_s10797-019-09551-y
    DOI: 10.1007/s10797-019-09551-y
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    Cited by:

    1. Cui, Wei & Hicks, Jeffrey & Xing, Jing, 2022. "Cash on the table? Imperfect take-up of tax incentives and firm investment behavior," Journal of Public Economics, Elsevier, vol. 208(C).
    2. Tom Moerenhout & Joonseok Yang, 2022. "Tax Evasion Attitudes of Small Firms in Low‐ and Middle‐income Countries: Evidence from Nigeria," Development Policy Review, Overseas Development Institute, vol. 40(6), November.
    3. Siamand Hesami & Hatice Jenkins & Glenn P. Jenkins, 2024. "Digital Transformation of Tax Administration and Compliance: A Systematic Literature Review on E-Invoicing and Prefilled Returns," Development Discussion Papers 2023-14, JDI Executive Programs.
    4. Cristea Loredana Andreea & Voda Alina Daniela & Ungureanu Dragos Mihai, 2021. "Tax Culture: Approached As A New Constituent Element Of The Fiscal System," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 124-132, April.

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    More about this item

    Keywords

    Tax administration; Firm performance; Firm productivity;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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