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Tax Capacity and Tax Effort: Extended Cross-Country Analysis from 1994 to 2009

52 Pages Posted: 20 Apr 2016  

Tuan Minh Le

affiliation not provided to SSRN

Blanca Moreno-Dodson

World Bank

Nihal Bayraktar

Pennsylvania State University - School of Business Administration; World Bank

Date Written: October 1, 2012

Abstract

One of the important factors for economic development is the existence of an effective tax system. This paper deals with the concept and empirical estimation of countries' taxable capacity and tax effort. It employs a cross-country study from a sample of 110 developing and developed countries during 1994-2009. Taxable capacity refers to the predicted tax-to-gross domestic product ratio that can be estimated empirically, taking into account a country's specific macroeconomic, demographic, and institutional features, which all change through time. Tax effort is defined as an index of the ratio between the share of the actual tax collection in gross domestic product and taxable capacity. The use of tax effort and actual tax collection benchmarks allows the ranking of countries into four different groups: low tax collection, low tax effort; high tax collection, high tax effort; low tax collection, high tax effort; and high tax collection, low tax effort. The analysis provides broad guidance for tax reforms in countries with various levels of taxable capacity and revenue intake.

Keywords: Taxation & Subsidies, Subnational Economic Development, Debt Markets, Emerging Markets, Economic Theory & Research

Suggested Citation

Le, Tuan Minh and Moreno-Dodson, Blanca and Bayraktar, Nihal, Tax Capacity and Tax Effort: Extended Cross-Country Analysis from 1994 to 2009 (October 1, 2012). World Bank Policy Research Working Paper No. 6252. Available at SSRN: https://ssrn.com/abstract=2167186

Tuan Minh Le (Contact Author)

affiliation not provided to SSRN

No Address Available

Blanca Moreno-Dodson

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Nihal Bayraktar

Pennsylvania State University - School of Business Administration ( email )

777 West Harrisburg Pike
Middletown, PA 17057-4898
United States
+1 717 948 6142 (Phone)

HOME PAGE: http://www.personal.psu.edu/nxb23/

World Bank

1818 H Street, N.W.
Washington, DC 20433
United States

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