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Measuring the Tax effort of Developed and Developing Countries. Cross Country – Panel Data Analysis – 1985/95

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  • Marcelo Piancastelli

Abstract

In the tax literature, the tax effort index for any country is usually measured by the ratio of the actual tax ratio to the predicted ratio. This reflects mainly the variance in the taxable capacity of a country. A high value of tax effort index indicates that a particular country is collecting more tax than would be predicted, given its tax structure and prevailing economic and social conditions. This paper estimates the tax effort index for a sample of 75 countries for the period 1985/95. It incorporates the most recently available data and also econometric techniques not used before for such a type of analysis. The results are then compared with previous studies encompassing different periods over the last 30 years. The evidence provided in this paper suggests that per capita income, the ratio of trade to GDP, and the share of agriculture in GDP of the product of the agricultural sector are the most consistent explanatory variables of the tax ratio, while several variables used in previous studies, such as the ratio of mining output to GDP, and the ratio of quasi-money to GDP, are not significant in the recent period under analysis. This paper shows those countries that have improved their tax performance, measured by the tax effort index, as well as those which have a less favourable performance. Tax ratios and tax effort comparisons are also made among the developed and developing countries according to income groups and different continents.

Suggested Citation

  • Marcelo Piancastelli, 2015. "Measuring the Tax effort of Developed and Developing Countries. Cross Country – Panel Data Analysis – 1985/95," Discussion Papers 0103, Instituto de Pesquisa Econômica Aplicada - IPEA.
    • Handle: RePEc:ipe:ipetds:0103
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    References listed on IDEAS

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    1. Slemrod, Joel, 1998. "Methodological Issues in Measuring and Interpreting Taxable Income Elasticities," National Tax Journal, National Tax Association, vol. 51(n. 4), pages 773-88, December.
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    3. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    4. Lotz, Joergen R & Morss, Elliott R, 1970. "A Theory of Tax Level Determinants for Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 18(3), pages 328-341, April.
    5. Paul Cashin, 1995. "Government Spending, Taxes, and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 237-269, June.
    6. Slemrod, Joel, 1998. "Methodological Issues in Measuring and Interpreting Taxable Income Elasticities," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(4), pages 773-788, December.
    7. Tanzi, Vito, 1992. "Fiscal policy and economic reconstruction in Latin America," World Development, Elsevier, vol. 20(5), pages 641-657, May.
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    Cited by:

    1. Rodrigo Pereira de Oliveira & Bruno Ferreira Frascaroli, 2019. "Measuring the Efficiency of Tax Collection among Economic Sectors in Paraíba State Northeastern Brazil (2013-2015)," International Business Research, Canadian Center of Science and Education, vol. 12(7), pages 24-33, July.
    2. Cordelia Onyinyechi Omodero & Winner Ayanate Igodo, 2024. "The Level of Development of Basic Infrastructure as a Factor in Stimulating Tax Revenue Growth in Nigeria," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 10(2), pages 292-311.

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