Tax Administration and Firm Performance: New Data and Evidence for Emerging Market and Developing Economies

By Era Dabla-Norris, Florian Misch, Duncan Cleary, Munawer Khwaja

April 14, 2017

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Era Dabla-Norris, Florian Misch, Duncan Cleary, and Munawer Khwaja. Tax Administration and Firm Performance: New Data and Evidence for Emerging Market and Developing Economies, (USA: International Monetary Fund, 2017) accessed December 3, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Tax compliance costs tend to be disproportionately higher for small and young businesses. This paper examines how the quality of tax administration affects firm performance for a large sample of firms in emerging market and developing economies. We construct a novel, internationally comparable, and multidimensional index of tax administration quality (the TAQI) using information from the Tax Administration Diagnostic Assessment Tool. We show that better tax administration attenuates the productivity gap of small and young firms relative to larger and older firms, a result that is robust to controlling for other aspects of tax policy and of economic governance, alternative definitions of small and young firms, and measures of the quality of tax administration. From a policy perspective, we provide evidence that countries can reap growth and productivity dividends from improvements in tax administration that lower compliance costs faced by firms.

Subject: Compliance costs, Labor productivity, Production, Revenue administration, Revenue performance assessment, Tax administration core functions, Tax Administration Diagnostic and Assessment Tool (TADAT), Tax return filing compliance

Keywords: Cash flow, Central and Eastern Europe, Central Asia, Compliance burden, Compliance cost, Compliance costs, Enterprise manager, Firm performance, Firm productivity, Global, Labor productivity, Micro enterprise, Omitted firm category, Small business, Tax administration, Tax administration core functions, Tax Administration Diagnostic and Assessment Tool (TADAT), Tax return filing compliance, Total factor productivity, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/095
Stock No:

WPIEA2017095
ISBN:

9781475595147
ISSN:

1018-5941

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