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

Abstract

One of the important factors for economic development is the existence of an effective tax system. The paper, which is the second part of Le, Moreno-Dodson, and Rojchaichaninthorn (2008), deals with the concept and empirical estimation of countries' taxable capacity and tax effort to develop further country tax effort typologies. 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 with the regression, taking into account a country's specific macroeconomic, demographic, and institutional features. Tax effort is defined as an index of the ratio between the share of the actual tax collection in gross domestic product and the predicted taxable capacity. The use of tax effort and actual tax collection benchmarks allows us to rank 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. This classification is based on the benchmark of the global average of tax collection and a tax effort index. The analysis provides guidance for tax reforms in countries with various levels of tax collection and tax effort.

Explaining Changes in Tax Burdens in Latin America: Does Politics Trump Economics?

“…In developed countries, the desirability of tax increases is controversial-some recent research suggests that spending cuts rather than tax increases lead to more successful fiscal consolidations (e.g., Alesina and Ardagna, 2013). In developing countries and in the Latin American countries we consider, however, where the tax burden as a percent of GDP is lower, scholars as well as the development community generally agree that there are benefits to governments if they can raise the amount of tax revenue they collect (e.g., Le, Moreno-Dodson and Bayraktar, 2012). Additional "tax effort" provides funds that the government may be able to use for a gradual expansion of social benefits such as education and health care.…”

Domestic Revenue Mobilisation

“…Figure 2 shows these trends across the full time period, highlighting the different evolutions of the tax-to-GDP ratios in Africa, LAC, and the OECD. 14 The OECD average tax-to-GDP ratio is the highest over the whole period and does not vary much over time. The Africa (16) average and the LAC average tax-to-GDP ratios follow similar upward trends , although the LAC average is 3 to 4 percentage points higher than the Africa (16) average.…”

Esforço fiscal em Portugal: uma avaliação no período 1995-2015

“…No âmbito das medidas do primeiro tipo, situam-se os índices de Frank e de Bird descritos em Santos (2013) Le et al (2012). Lotz e Morss (1967) estimaram, com base em médias de três anos extraídas de dados do período 1961-1966 para 72 países em vias de desenvolvimento, uma relação linear entre a carga fiscal (receita fiscal relativizada pelo PNB) e o PNB per capita.…”

“…Dado que a investigação de Bird e Martinez-Vazquez (2008) visava principalmente a avaliação do impacto da voice and accountability e da corrupção sobre a carga fiscal, o artigo não disponibiliza índices de esforço fiscal. Le et al (2012) estimaram uma carga fiscal padrão -que os autores designaram de taxable capacity -para um conjunto de 107 países desenvolvidos e em vias de desenvolvimento com base em dados anuais para o período 1994-2009. As variáveis determinantes da carga fiscal padrão são o PIB per capita a preços constantes, a taxa de crescimento da população em idade ativa (15-64 anos) (ou, em alternativa, o índice de dependência da população), o grau de abertura da economia ao exterior, o peso do valor acrescentado pela agricultura no PIB e um índice da qualidade institucional e de governança.…”