Tax Potential vs. Tax Effort: A Cross-Country Analysis of Armenia's Stubbornly Low Tax Collection

May 1, 2007

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David A. Grigorian, and Hamid R Davoodi. Tax Potential vs. Tax Effort: A Cross-Country Analysis of Armenia's Stubbornly Low Tax Collection, (USA: International Monetary Fund, 2007) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Despite recording double digit growth since 2000, Armenia's tax-to-GDP ratio has been fairly stable at about 14½ percent. This paper catalogues a range of factors that may account for Armenia's stubbornly for tax collection by benchmarking Armenia's tax-to-GDP against some comparator countries and conducting an extensive econometric study of the main determinants of tax collection. We find empirical support for the hypothesis that the persistence of Armenia's low tax-GDP ratio can be traced to persistence of weak institutions and a large shadow economy. The gap between the potential and actual tax collection in Armenia could be as high as 6½ percent of GDP. We conclude with some policy recommendations that, if adopted, can boost revenue buoyancy.

Subject: Economic sectors, Income and capital gains taxes, Informal economy, Revenue administration, Tax administration core functions, Tax collection, Taxes

Keywords: Armenia, CIS country, Income and capital gains taxes, Informal economy, Institutions, Middle East and Central Asia, Revenue buoyancy, Shadow economy, Small share, Tax administration core functions, Tax collection, Tax effort, Tax morale, Tax performance, Tax potential, Tax revenue, Tax-to-GDP ratio, VAT collection, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2007/106
Stock No:

WPIEA2007106
ISBN:

9781451866704
ISSN:

1018-5941

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