Exploring the Deep Determinants of Tax Effort
30 Pages Posted: 24 Jul 2019 Last revised: 4 Aug 2019
Date Written: July 22, 2019
The tax effort literature explains cross-country variation in tax revenues using various determinants of tax revenues. To date, this literature has viewed tax effort primarily as a function of current economic and political circumstances; proximate determinants of tax effort. Borrowing from the development economics literature, this paper explores ‘deep determinants’ of tax effort. I consider how geography, formal institutions, and informal institutions influence tax effort in a large cross-section of countries. A theory based on ‘institutional efficiency’ is proposed that may partly explain the poor tax effort in many developing countries.
Keywords: tax effort, deep determinants, geography, institutions
JEL Classification: H20, B52
Suggested Citation: Suggested Citation