Tax Potential vs. Tax Effort: A Cross-Country Analysis of Armenia's Stubbornly Low Tax Collection

40 Pages Posted: 8 May 2007

See all articles by Hamid R. Davoodi

Hamid R. Davoodi

International Monetary Fund (IMF) - Fiscal Affairs Department

David Grigorian

International Monetary Fund (IMF)

Date Written: May 2007

Abstract

Despite recording double digit growth since 2000, Armenia's tax-to-GDP ratio has been fairly stable at about 14½ percent. This paper catalogues a range of factors that may account for Armenia's stubbornly for tax collection by benchmarking Armenia's tax-to-GDP against some comparator countries and conducting an extensive econometric study of the main determinants of tax collection. We find empirical support for the hypothesis that the persistence of Armenia's low tax-GDP ratio can be traced to persistence of weak institutions and a large shadow economy. The gap between the potential and actual tax collection in Armenia could be as high as 6½ percent of GDP. We conclude with some policy recommendations that, if adopted, can boost revenue buoyancy.

Suggested Citation

Davoodi, Hamid R. and Grigorian, David A., Tax Potential vs. Tax Effort: A Cross-Country Analysis of Armenia's Stubbornly Low Tax Collection (May 2007). IMF Working Papers, Vol. , pp. 1-38, 2007. Available at SSRN: https://ssrn.com/abstract=984611

Hamid R. Davoodi

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

David A. Grigorian (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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