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Corruption, Tax Evasion, and Economic Development in Economies with Decentralised Tax Administrative System

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  • Anum Ellahi

    (Lahore School of Economics, Lahore.)

Abstract

This theoretical paper looks into joint determination of corruption and development where there is a decentralised bureaucratic setup in a multi-tiered system: tier one bureaucrats and tier two bureaucrats. Corruption takes place at two levels, firstly when tier one bureaucrats collude with households for tax evasion, and secondly when tier one and tier two bureaucrats collude to hide corruption. This paper determines that at high levels of corruption, there is low development, and at a low incidence of corruption, there is high development. This paper postulates that for a developing country like Pakistan, low tax collection due to poor institutional decentralisation leads to low economic growth and development.

Suggested Citation

  • Anum Ellahi, 2020. "Corruption, Tax Evasion, and Economic Development in Economies with Decentralised Tax Administrative System," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(3), pages 419-438.
    • Handle: RePEc:pid:journl:v:59:y:2020:i:3:p:419-438
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    More about this item

    Keywords

    Corruption; Tax Evasion; Economic Growth;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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