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Measuring Tax Administration Effectiveness and its Impact on Tax Revenue

Author

Listed:
  • DAS-GUPTA Arindam

    (Goa Institute of Management)

  • B. ESTRADA Gemma

    (Asian Development Bank)

  • PARK Donghyun

    (Asian Development Bank)

Abstract

This paper proposes a method for constructing a tax administration measure of effectiveness or TAME, and describes its desirable properties. TAME was empirically constructed using data from external audits of value-added tax administrations of India’s state governments. TAME was used to quantitatively assess the impact of tax administration effectiveness on tax revenues. The impact was found to be both statistically significant and large. The causes of tax administration effectiveness in the poorly performing states were then identified. Finally, this paper suggests guidelines for constructing TAMEs for other jurisdictions and time periods.

Suggested Citation

  • DAS-GUPTA Arindam & B. ESTRADA Gemma & PARK Donghyun, 2016. "Measuring Tax Administration Effectiveness and its Impact on Tax Revenue," Working Papers DP-2016-17, Economic Research Institute for ASEAN and East Asia (ERIA).
    • Handle: RePEc:era:wpaper:dp-2016-17
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    References listed on IDEAS

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    1. Michael Keen, 2013. "The Anatomy of the Vat," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(2), pages 423-446, June.
    2. John Hasseldine, 2010. "The Administration of Tax Systems," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1021, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. William Joseph Crandall, 2010. "Revenue Administration; Performance Measurement in Tax Administration," IMF Technical Notes and Manuals 10/11, International Monetary Fund.
    4. Das-Gupta, Arindam & Lahiri, Radhika & Mookherjee, Dilip, 1995. "Income tax compliance in India: An empirical analysis," World Development, Elsevier, vol. 23(12), pages 2051-2064, December.
    5. Gil S. Epstein & Ira N. Gang, 2010. "Why Pay Taxes When No One Else Does?," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 374-385, May.
    6. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-373, August.
    7. William Joseph Crandall, 2010. "Revenue Administration: Performance Measurement in Tax Administration," IMF Technical Notes and Manuals 2010/011, International Monetary Fund.
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    Cited by:

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    2. Sanjeeb Kumar Dey, 2023. "Taxpayers’ Perceptions Towards Income Tax Administration: A Study from Indian Perspectives," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 9(3), pages 300-316.
    3. Mariana Luminița Coman (Linţă) & Genifera Claudia Bănică, 2020. "Analysis of the Efficiency of Fiscal Revenue Collection in Romania in the Period 2016-2018," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 883-892, August.
    4. Mzalendo, Ryoba & Chimilila, Cyril, 2020. "Tax administration, Taxpayer’s Reciprocity and Compliance in Tanzania: Empirical Evidence from a Survey," African Journal of Economic Review, African Journal of Economic Review, vol. 8(2), July.
    5. Gil S. Epstein & Ira N. Gang, 2019. "Inequality, good governance, and endemic corruption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 999-1017, October.
    6. Mukherjee, Sacchidananda, 2017. "Changing Tax Capacity and Tax Effort of Indian States in the Era of High Economic Growth, 2001-2014," Working Papers 17/196, National Institute of Public Finance and Policy.
    7. Andrew Feltenstein & Jorge Martinez-Vazquez & Biplab Datta & Sohani Fatehin, 2022. "A general equilibrium model of Value Added Tax evasion: an application to Pakistan," International Economics and Economic Policy, Springer, vol. 19(3), pages 537-556, July.
    8. Gil S. Epstein & Ira N. Gang, 2019. "Inequality, good governance, and endemic corruption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 999-1017, October.

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    More about this item

    Keywords

    effectiveness; India; tame; tax administration; tax revenues; value-added tax;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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