This paper investigates the role of Value Added Tax (VAT) and excises in first wave tax transition (movement away from international trade taxes towards domestic revenue collection) of developing countries. Focusing on a sample of 96 developing countries over the period 1985-2013, we investigate whether the adoption of VAT enables developing countries to increase the likelihood of succeeding tax transition. Results indicate that having a VAT, allows developing countries to increase the probability of succeeding tax transition by 12%. We further investigate the extent to which VAT and excises offset trade tax revenue losses of trade liberalization in these countries. Our estimates reveal that VAT is offsetting for about 52% trade tax revenue losses in developing countries with a U relationship, while this effect holds for excises duties with a U inverted relationship. The study also points out heterogeneities (while VAT adoption tax transition effect is robust to African and Asian countries, it seems not for Latin American countries), as well as asymmetries (the revenue collection of VAT and excises didn't increase the period over which developing countries face an increase in trade tax). While enhancing tax administration fosters the transition process in these countries, the study however suggests taking with closer attention VAT and excises as powerful first wave tax transition tools in developing countries.

Does the revenue replacement strategy of border taxes with domestic revenue collection (tax transition) increase efficiency in collecting revenues in developing countries? This article attempted to answer the question, by assessing the efficiency consequences of announcing a tax transition reform program in West African Economic and Monetary Union (WAEMU) countries. Through an impact evaluation framework with propensity score matching and synthetic control method, we find that the announcement of this reform in WAEMU countries increases efficiency in mobilizing resources at the community level as compared to their counterfactual. Efficient mobilization of resources increases by 4.3% around the reform agenda and is achieved 3 years following the announcement of the reform in these countries. We also find that the achieved efficiency in mobilizing resources goes hand in hand with an improvement in tax‐oriented Doing Business indicators at the community level, by increasing the contribution rate score of firms by near 22 scales and reducing collection time scores by 4.2 scales as compared to the best Doing Business practices on these indicators. The article also evidenced that the reform is overall working through the tax discipline channel rather than tax morale in these countries. Furthermore, having adopted value added tax (VAT), implemented semi‐autonomous revenue agencies (SARAs) and large taxpayers' units (LTUs) contribute to foster the revenue efficiency effect of the reform in above‐mentioned countries.

This paper investigates second wave tax transition (transfer of tax pressure from border taxation towards domestic taxation) concerns in developing countries. It essentially focuses on the compensation effects of incomes and property taxes over international trade tax revenue losses in developing countries. Using a generalized method of moment estimator, we come to the evidence that, incomes and property taxes are poor instruments to balance trade tax revenue losses of trade liberalization in these countries. However, a mediating effect of financial development in the compensation nexus driven by corporate income taxes was found. We explain this result by the fact that the use of financial sector generates paper trails to government in order to enforce and raise corporate income taxes. Financial development may progressively crowd-out informal sector and leads to business formalization. Surprising, we do not find any mediating effect of financial development in the compensation patterns with personal income taxes. Nevertheless, some heterogeneities were discovered. Financial development mediates the compensation patterns of personal income taxes in Latin American countries, while the effect holds on corporate income taxes in African countries. We conclude the paper by highlighting the important role of financial development in second generation tax transition concerns over developing countries.