Globalization and Developing Countries - A Shrinking Tax Base?
29 Pages Posted: 14 Oct 2008
Date Written: May 1, 2007
This paper evaluates the impact of globalization on tax bases of countries at varying stages of development. We see globalization as a process that induces countries to embrace greater trade and financial integration. This in turn should shift their tax revenue from "easy to collect" taxes (tariffs and seigniorage) towards "hard to collect" taxes (value added and income taxes). We find that trade and financial openness have a positive association with the "hard to collect" taxes, and a negative association with the "easy to collect" taxes.
Keywords: Globalization, tax base, fiscal convergence, VAT, financial repression, tariff
JEL Classification: F15, H21
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