Expanding Taxable Capacity and Reaching Revenue Potential: Cross-Country Analysis

40 Pages Posted: 20 Apr 2016

See all articles by Tuan Minh Le

Tuan Minh Le

affiliation not provided to SSRN

Blanca Moreno-Dodson

World Bank

Jeep Rojchaichaninthorn

affiliation not provided to SSRN

Date Written: March 1, 2008

Abstract

An effective tax system is fundamental for successful country development. The first step to understand public revenue systems is to establish some commonly agreed performance measurements and benchmarks. This paper employs a cross-country study to estimate tax capacity from a sample of 104 countries during 1994-2003. The estimation results are then used as benchmarks to compare taxable capacity and tax effort in different countries. Taxable capacity refers to the predicted tax-gross domestic product ratio that can be estimated with the regression, taking into account a country's specific economic, 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 authors classify countries into four distinct groups by their level of actual tax collection and attained tax effort. This classification is based on the benchmark of the global average of tax collection and a tax effort index of 1 (when tax collection is exactly the same as the estimated taxable capacity). The analysis provides guidance for countries with various levels of tax collection and tax effort.

Keywords: Taxation &Subsidies, Debt Markets, Public Sector Economics &Finance, Emerging Markets, Economic Theory &Research

Suggested Citation

Le, Tuan Minh and Moreno-Dodson, Blanca and Rojchaichaninthorn, Jeep, Expanding Taxable Capacity and Reaching Revenue Potential: Cross-Country Analysis (March 1, 2008). World Bank Policy Research Working Paper No. 4559, Available at SSRN: https://ssrn.com/abstract=1107608

Tuan Minh Le (Contact Author)

affiliation not provided to SSRN

No Address Available

Blanca Moreno-Dodson

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Jeep Rojchaichaninthorn

affiliation not provided to SSRN

No Address Available