Understanding Countries’ Tax Effort

Abstract

This paper presents a model to determine the tax effort and tax capacity of 113 countries and the main variables on which they depend. The results and the model allow a clear determination of which countries are near their tax capacity and which are some way from it, and therefore, could increase their tax revenue. This paper also determines central factors on which tax capacity depends: the level of development, trade, education, inflation, income distribution, corruption, and the ease of tax collection.

Keywords: Taxes, Natural resources, Tax systems, Economic models, Cross country analysis, tax effort, tax frontier, tax capacity, tax revenue, stochastic tax frontier, inefficiency, tax revenues, tax analysis, determinants of tax revenue, tax administration, tax collection, tax administrations, tax legislation, total tax revenue, taxation, taxpayer compliance, theory of taxation, taxable capacity, vat rate, optimal taxation, level of taxation, export taxes, revenue collection, effective tax rates, tax structures, international tax

JEL Classification: C23, C51, H20, H21