Tax Revenue Mobilization Episodes in Emerging Markets and Low-Income Countries: Lessons from a New Dataset

Abstract

How do countries mobilize large additions to tax revenue-defined as an average increase in the tax-to-GDP ratio of 0.5 percent per year over three years or more? To answer this question, we build a novel dataset covering 55 episodes of large tax revenue increases in low-income countries and emerging markets. We find that: (i) reforms of indirect taxes and exemptions are the most common tax policy measures; (ii) multi-pronged tax administration reforms often go hand in hand with tax policy measures; and (iii) sustainability of the episodes hinges on tax administration reforms in the key compliance areas (risk-based audits, registration, filing, payment, and reporting). JEL Classification Numbers: E62, H2

Tax revenue mobilization episodes in developing countries

“…Our research revealed that a high-level political commitment and buy-in from all stakeholders played a crucial role for success. These findings are further discussed in the follow-up papers on cases studies Akitoby, Baum, et al 2019;. For example, Georgia's comprehensive tax reform was feasible only after the country had reached a high degree of dysfunction, triggering a revolution.…”

“…Moreover, applying tax reform lessons to a specific country calls for a selective adaptation as equity and political economy factors can become serious implementation obstacles. Three follow-up papers discuss cases studies in more detail Akitoby, Baum, et al 2019;, which will help public authorities to tailor their revenue mobilization design to country successes with similar political or economic backgrounds.…”

“…For example, in Paraguay the authorities streamlined the auditing and collection process, improved the efficiency of the customs clearance process, and adopted measures to reduce corruption. The anti-corruption driven revenue mobilization strategy in Georgia (2003Georgia ( -2008 also benefitted from a range of administrative measures, including the mass-replacement and training of staff, strengthening of legal procedures for tax disputes, upgrading of IT, simplifying of tax returns and improvement of audits (Akitoby 2018;Akitoby et al 2018b). 13 In some cases, the initial success following tax policy measures was eroded in the absence of sustained reform efforts for revenue administration.…”

“…We are similarly grateful for the detailed suggestions and comments from in-depth review by various IMF staff. Further details on the analysis can be found in the IMF Working Paper (see Akitoby et al, 2018aAkitoby et al, , 2018b and three forthcoming case-study papers on fragile states, low-income countries, and emerging markets Akitoby, Baum, et al 2019;.…”

Sudan

“…and low-income countries (LICs) have significantly increased tax revenue collection over a medium-term period. As highlighted inAkitoby et al (2018), several fragile states and LICs have sustained increases in their tax-to-GDP ratios, even under unstable Source: World Economic Outlook database; and IMF staff estimates.…”