## wp1795

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### Purpose and research question
- Focus: link between tax compliance costs (burden associated with determining, documenting, and making payments to meet tax obligations and complying with post-filing procedures) and firm performance.
- Emphasis: differential impact across firm size and age, with special attention to small and medium enterprises (SMEs) and young firms.
- Identifying assumption: small and young firms are likely to benefit more than larger and more mature firms from administrations that alleviate tax compliance burdens.
- Empirical strategy: difference-in-difference approach using firm-level data to attenuate reverse causality and address omitted variable bias.

### Data and index construction
- Novel Tax Administration Quality Index (TAQI) compiled using country-specific information on dimensions of tax administration pertinent for tax compliance burden.
- TAQI draws upon the Tax Administration Diagnostic Assessment Tool (TADAT).
- Country-level TAQI linked to firm-level data from the World Bank Enterprise Surveys for 21 emerging market and developing countries.
- Supplementary robustness check uses the electronic filing rate from the Revenue Administration Fiscal Information Tool (RA-FIT) database (one particular sub-component of the TAQI).

### Conceptual motivation and mechanisms
- Tax compliance costs contain substantial fixed components (e.g., filing a VAT return costs the same regardless of the amount remitted), disproportionately affecting SMEs and young firms.
- Larger firms benefit from economies of scale and specialization; younger and less-experienced firms face greater challenges in post-filing procedures (e.g., claiming a VAT refund, undergoing a tax audit, appealing a tax assessment).
- High compliance burden can divert resources from productive activities (investment, innovation) and increase input costs without creating additional output, potentially reducing firm productivity.
- Empirical evidence cited: 35-year old plants were on average nine times more productive in the manufacturing sector in the US; new firms generally exhibit lower productivity growth than incumbents.

### Composition and scoring of the TAQI
- TAQI captures 33 dimensions grouped into four broad categories:
  - (i) supporting taxpayer information;
  - (ii) filing and payment;
  - (iii) post-filing processes;
  - (iv) accountability and transparency on the part of the tax authorities.
- Index objective: systematize information on desirable characteristics and functioning of tax administration across areas relevant for compliance burden; abstract from tax policy considerations.
- Scoring: TADAT experts rate each dimension on a four-point ‘ABCD’ scale converted to numerical scale 0–4 (0 = D, 4 = A); some factual questions coded binary (0 or 4).
- Aggregation: sub-indices and overall TAQI constructed by simple unweighted averaging (arithmetic mean).
- Robustness checks: TAQI2 (equal weighting of 33 dimensions) and TAQI-PCA (first principal component).

### Exact TAQI components (areas and components)
- Supporting Taxpayer Information: range, currency, ease, response time, taxpayer input in design, initiatives to reduce compliance costs, feedback mechanisms.
- Filing and Payment: percent of timely CIT/PIT/VAT/PAYE declarations; extent tax declarations and core taxes are paid electronically.
- Post-filing Processes: detection of unregistered taxpayers, risk assessment procedures, large-scale automated crosschecking, VAT refund adequacy and timing, audit program nature and scope, dispute review mechanisms and timing, response to dispute outcomes.
- Accountability and Transparency: internal audit assurance; staff integrity assurance mechanisms; independent external oversight; investigation process for wrongdoing; monitoring public confidence; timeliness of publication of financial/operational performance and future directions.

### Stylized facts and illustrative statistics
- Learning about tax laws represents between 5-10 percent of total tax compliance costs (Evans et al., 1997; Evans et al., 2013).
- Combined share of learning and dealing with external tax advisers estimated to range between 17-25 percent of all compliance costs in advanced economies (Lignier and Evans, 2012).
- Tax compliance burden as a proportion of sales — SMEs relative to large firms (country-specific values; data from different years; SME definitions differ):
  - Uzbekistan: 156
  - Ukraine: 117.14
  - Armenia: 87.5
  - South Africa: 60
  - EU average: 13
  - The Netherlands: 3.33
  - New Zealand: 3
  - Canada: 1.67
- Note: Ukraine example highlighted — compliance costs for SMEs are 117 percent higher relative to sales than in large firms.

### Main empirical findings
- A lower compliance burden (higher TAQI score) has a positive and statistically significant effect on productivity of small and young firms.
- Effects robust to:
  - alternative measures of firm productivity;
  - controlling for tax policy and economic governance;
  - alternative definitions of small and young firms;
  - controlling for firms’ propensity to remain below monitoring thresholds;
  - changes in country coverage using RA-FIT electronic filing rates.
- Economic significance: plausible improvements in tax administration quality can partially offset the productivity disadvantage for small and young firms.
- Illustrative magnitude examples:
  - Baseline: small firms are on average 23 percent less productive than larger firms; young firms are on average 18 percent less productive than older firms.
  - For a country with weak tax administration (TAQI score of 1.39, the 25th percentile), productivity of small firms is on average 45 percent lower than that of larger firms.
  - If TAQI increases by one standard deviation (0.681), the productivity gap for small firms falls so that small firms would be only 6 percent lower than larger firms.
  - Improving from Liberia’s TAQI score of 0.73 to Zambia’s score of 2.33 could eliminate 81 percent of the productivity gap between small and larger firms.

### Measurement, scoring and aggregation (accountability & transparency focus)
- Accountability and Transparency sub-index: simple average of its seven dimensions.
- TADAT assessments: initiated in 2013; assessments available for over 37 countries; full TADAT has 47 measurement dimensions, 33 used in TAQI construction.
- Reliability and correlation statistics:
  - average correlation among the four sub-indices is below 0.5;
  - coefficient of reliability for the overall index is 0.8;
  - average intra-sub-index correlations range from 0.4 to 0.5;
  - associated reliability coefficient estimates range from 0.7 to 0.8.

### Empirical findings linking accountability & transparency (and sub-indices) to firm performance
- Interaction of SMALL (or YOUNG) with TAQI and with sub-indices (TA-SUB1, TA-SUB2, TA-SUB3, TA-SUB4) is positive and statistically significant.
- Magnitude highest for post-filing processes (TA-SUB3), though coefficient differences across sub-indices are not statistically different (t-test).
- RA-FIT extension (average electronic filing percentage):
  - expanded sample of 30 countries and almost 16,000 firms;
  - electronic filing rate shows differential and significant effects on firm performance similar to TAQI results.

### Policy implications and recommendations
- Enhancing tax administration quality can disproportionately benefit small and young firms by lowering fixed components of tax compliance costs.
- Policy focus areas:
  - enhancing taxpayer information and taxpayer services;
  - simplifying filing and payment processes and promoting electronic filing and payment systems;
  - improving post-filing processes, including efficient VAT refund processing, risk-based audits, effective use of third-party information and big data analytics, and fair and independent dispute resolution mechanisms;
  - strengthening accountability and transparency: external oversight, independent investigation mechanisms, staff integrity and internal assurance, and timely public disclosure of performance and future directions.
- Administrative reforms are an alternative or complement to simplified small-business tax regimes and may help small firms grow without revenue risks associated with some simplified regimes.

### Caveats and limitations
- TAQI does not capture special tax regimes for small firms; reported TAQI effects on small-firm productivity may be underestimated if such regimes lower compliance costs.
- Firm-level data confined to formal sector (firms with at least 5 employees); micro-enterprises (fewer than 5 employees), voluntary formalization, and informal-sector dynamics are not examined.
- TADAT assessments are expert-based and in many cases confidential, restricting presentation of country-specific TAQI scores.
- Some aspects of e-filing can increase compliance costs if mandatory without optionality, combined with paper reporting, or implemented with complex procedures.

### Key statistics and selected regression coefficients (preserved exactly)
- Table 1. Index Inter-Item Correlations
  - TA-SUB1: Average Inter-Item Correlation 0.38; No. of Components 7; Scale Reliability Coefficient 0.65
  - TA-SUB2: Average Inter-Item Correlation 0.52; No. of Components 6; Scale Reliability Coefficient 0.77
  - TA-SUB3: Average Inter-Item Correlation 0.38; No. of Components 13; Scale Reliability Coefficient 0.65
  - TA-SUB4: Average Inter-Item Correlation 0.51; No. of Components 7; Scale Reliability Coefficient 0.76
  - TAQI (average): Average Inter-Item Correlation 0.45; No. of Components 4; Scale Reliability Coefficient 0.76
- Table 2. Spearman Rank Correlation Between Alternative Indices (selected entries)
  - TAQI with TAQI2: 0.99
  - TAQI with TA-PCA: 0.96
  - TAQI2 with TA-PCA: 0.95
- Table 4. Summary Statistics of Country-Level Variables (N varies)
  - TAQI: Min 0.557; Mean 1.751; Median 1.986; Max 2.738; Std. dev. 0.681; N 21
  - TAQI2: Min 0.333; Mean 1.722; Median 1.867; Max 2.800; Std. dev. 0.758; N 21
  - TA-SUB1: Min 0.380; Mean 2.269; Median 2.445; Max 3.620; Std. dev. 0.974; N 21
  - TA-SUB2: Min 0; Mean 1.581; Median 1.557; Max 3.778; Std. dev. 1.059; N 21
  - TA-SUB3: Min 0.205; Mean 1.414; Median 1.537; Max 2.425; Std. dev. 0.646; N 21
  - TA-SUB4: Min 0; Mean 1.741; Median 1.713; Max 3.810; Std. dev. 0.899; N 21
  - RAFIT: Min 10; Mean 24.27; Median 25; Max 35; Std. dev. 8.254; N 30
- Selected regression coefficients (standard errors in brackets)
  - SMALL (Labor productivity, Table 5 / 6 col 1): -0.226*** [0.048]
  - YOUNG (Labor productivity, Table 5 / 6 col 1): -0.179*** [0.042]
  - SMALL x TAQI (Labor productivity): 0.563*** [0.088]
  - YOUNG x TAQI (Labor productivity): 0.190*** [0.065]
  - SMALL x TAQI (Table 7 / 8 variants): 0.426*** [0.089]; 0.478*** [0.085]; 0.582*** [0.106]
  - YOUNG x TAQI (Table 7): 0.126* [0.074]; 0.174** [0.082]; 0.195** [0.095]
  - SMALL x E-FILING (RA-FIT extension): 0.066*** [0.019]; 0.055*** [0.020]
  - YOUNG x E-FILING (RA-FIT extension): 0.135*** [0.037]; 0.123*** [0.035]
- RA-FIT extension sample:
  - Observations 15,816; # of countries: 30; # of industries: 23
- Significance notation: *** p<0.01, ** p<0.05, * p<0.1. Standard errors clustered by industry & country.

*Source: wp1795 (IMF Working Paper — "Index Inter-Item Correlations" and "Accountability and Transparency"; wp1795 PDF).*

### 1. Index Inter-Item Correlations .......................................................................................

### 1. Index Inter-Item Correlations

### H3: Purpose and Research Question
- Focus: link between tax compliance costs (burden associated with determining, documenting, and making payments to meet tax obligations and complying with post-filing procedures) and firm performance.
- Emphasis on differential impact across firm size and age, with special attention to small and medium enterprises (SMEs) and young firms.
- Identifying assumption: small and young firms are likely to benefit more than larger and more mature firms from administrations that alleviate tax compliance burdens.
- Empirical strategy: difference-in-difference approach using firm-level data to attenuate reverse causality and address omitted variable bias.

### H3: Data and Index Construction
- Novel Tax Administration Quality Index (TAQI) compiled using country-specific information on dimensions of tax administration pertinent for tax compliance burden.
- TAQI draws upon the Tax Administration Diagnostic Assessment Tool (TADAT).
- Country-level TAQI linked to firm-level data from the World Bank Enterprise Surveys for 21 emerging market and developing countries.
- Supplementary robustness check uses the electronic filing rate from the Revenue Administration Fiscal Information Tool (RA-FIT) database (one particular sub-component of the TAQI).

### H3: Conceptual Motivation and Mechanisms
- Tax compliance costs contain substantial fixed components (e.g., filing a VAT return costs the same regardless of the amount remitted), disproportionately affecting SMEs and young firms.
- Larger firms benefit from economies of scale and specialization; younger and less-experienced firms face greater challenges in post-filing procedures (e.g., claiming a VAT refund, undergoing a tax audit, appealing a tax assessment).
- High compliance burden can divert resources from productive activities (investment, innovation) and increase input costs without creating additional output, potentially reducing firm productivity.
- Empirical evidence cited: 35-year old plants were on average nine times more productive in the manufacturing sector in the US (Hsieh and Klenow (2014)); new firms generally exhibit lower productivity growth than incumbents (Li and Rama, 2015).

### H3: Composition and Scoring of the TAQI
- TAQI captures 33 dimensions grouped into four broad categories (performance outcome areas):
  - (i) supporting taxpayer information;
  - (ii) filing and payment;
  - (iii) post-filing processes;
  - (iv) accountability and transparency on the part of the tax authorities.
- Index objective: systematize information on desirable characteristics and functioning of tax administration across areas relevant for compliance burden; abstract from tax policy considerations.
- Appendix 1 provides a detailed description of the scoring methodology (not reproduced here).

### H3: Box — Areas and Components of the Tax Administration Quality Index (exact components)
- 1. Supporting Taxpayer Information
  - The range of information available to taxpayers to explain, in clear terms, what their obligations and entitlements are in respect of each core tax
  - The degree to which information is current in terms of the law and administrative policy
  - The ease by which taxpayers obtain information from the tax administration
  - The time taken to respond to taxpayer and intermediary requests for information
  - The extent to which taxpayer input is taken into account in the design of administrative processes and products
- 2. Filing and Payment of Tax Declarations
  - The number of CIT declarations filed by the statutory due date as a percentage of the number of declarations expected from registered CIT taxpayers
  - The number of PIT declarations filed by the statutory due date as a percentage of the number of declarations expected from registered PIT taxpayers
  - The number of VAT declarations filed by the statutory due date as a percentage of the number of declarations expected from registered VAT taxpayers
  - The number of PAYE withholding declarations filed by employers by the statutory due date as a percentage of the number of PAYE declarations expected from registered employers
  - The extent to which tax declarations are filed electronically
  - The extent to which core taxes are paid electronically
- 3. Post-filing Processes
  - The extent of initiatives to detect businesses and individuals who are required to register but fail to do so
  - The process used to assess, rank, and quantify taxpayer compliance risks
  - The extent of large-scale automated crosschecking to verify information in tax declarations
  - The nature and scope of proactive initiatives undertaken to encourage accurate reporting
  - The extent of intelligence gathering and research to identify compliance risks in respect of the main tax obligations
  - The nature and scope of the tax audit program in place to detect and deter inaccurate reporting
  - Adequacy of the VAT refund system
  - The time taken to pay (or offset) VAT refunds
  - The extent to which an appropriately graduated mechanism of administrative and judicial review is available to, and used by, taxpayers
  - Whether the administrative review mechanism is independent of the audit process
  - Whether information on the dispute process is published, and whether taxpayers are explicitly made aware of it
  - The time taken to complete administrative reviews
  - The extent to which the tax administration responds to dispute outcomes

### H3: Stylized Facts and Illustrative Statistics
- Studies show learning about tax laws represents between 5-10 percent of total tax compliance costs (Evans et al., 1997; Evans et al., 2013).
- Combined share of learning and dealing with external tax advisers estimated to range between 17-25 percent of all compliance costs in advanced economies (Lignier and Evans, 2012).
- Figure 1 (Tax Compliance Burden as a Proportion of Sales - SMEs Relative to Large Firms) reports country-specific values (data from different years; definition of SMEs differs across countries):
  - Uzbekistan: 156
  - Ukraine: 117.14
  - Armenia: 87.5
  - South Africa: 60
  - EU average: 13
  - The Netherlands: 3.33
  - New Zealand: 3
  - Canada: 1.67
- Note: these values illustrate large disparities in compliance burden for SMEs relative to large firms; Ukraine example highlighted in text: compliance costs for SMEs are 117 percent higher relative to sales than in large firms.

### H3: Main Empirical Findings
- Positive and statistically significant effect of a lower compliance burden (i.e., a high TAQI score) on the productivity of small and young firms.
- Effects robust to:
  - alternative measures of firm productivity;
  - controlling for various aspects of tax policy and economic governance that could have heterogeneous effects across firms;
  - alternative definitions of small and young firms;
  - controlling for the propensity of firms to remain below a specific size threshold in a particular country (and sector) to avoid being monitored by tax authorities;
  - changes in country coverage using the electronic filing rate from RA-FIT.
- Economic significance: magnitude of productivity gains from plausible improvements in tax administration quality can partially offset the productivity disadvantage for small and young firms.

### H3: Related Literature and Theoretical Context
- Links to literature on tax capacity and growth, tax administrative interventions, firm-level compliance behavior, and optimal tax enforcement.
- Examples cited:
  - Braunerhjelm and Eklund (2014): a 10 percent reduction in the tax administrative burden (number of tax payments per year and time required to pay taxes) leads to a 3 percent increase in annual business entry rates.
  - Asatryan and Peichl (2016): filing frequency requirements in Armenia lead to bunching of firms below thresholds and underreporting/reduced sales.
  - Almunia and Lopez-Rodriguez (2015): firms bunch below thresholds for increased monitoring.
- World Bank Doing Business Indicators reflect both tax administration quality and tax policy complexity, complicating isolation of tax administration effects.

### H3: Organization of the Paper (sections referenced)
- Section II: describes compilation of the index of tax administration quality.
- Section III: discusses data sources and presents stylized facts.
- Section IV: describes and discusses empirical results.
- Section V: concludes.

*Source: wp1795 - 1. Index Inter-Item Correlations*

### 4. Accountability and Transparency

### 4. Accountability and Transparency

### Key dimensions of accountability and transparency in tax administration
- Accountability is assessed along four dimensions:
  - external oversight of tax administration’s performance;
  - independent and impartial investigation of taxpayer’s complaints of wrongdoing, maladministration and corruption;
  - embracing ethical standards and staff integrity policies;
  - internal assurance mechanisms to ensure adherence to internal control and governance framework.
- Transparency is assessed by whether the tax administration is open about its performance and future directions and whether these are published.
- Specific operational items mentioned for accountability and transparency include:
  - degree of assurance provided by internal audit;
  - existence of staff integrity assurance mechanisms;
  - extent of independent external oversight of the tax administration’s operations and financial performance;
  - investigation process for suspected wrongdoing and maladministration;
  - mechanism for monitoring public confidence in the tax administration;
  - extent and timeliness of publication of the tax administration’s future directions and plans;
  - extent and timeliness of publication of the financial and operational performance of the tax administration.

### Measurement, scoring and aggregation
- The overall Tax Administration Quality Index (TAQI) comprises 33 dimensions grouped into four sub-indices.
- Accountability and Transparency sub-index is the simple average of its seven dimensions.
- TADAT experts rate each dimension on a four-point ‘ABCD’ scale with standardized criteria:
  - ‘A’ = performance meets or exceeds international good practice;
  - ‘B’ = sound performance but below international good practice;
  - ‘C’ = weak performance relative to international good practice;
  - ‘D’ = inadequate performance or insufficient information to score.
- Numerical conversion:
  - ‘ABCD’ scale converted to numerical scale ranging from 0 to 4, where 0 reflects ‘D’ and 4 reflects ‘A’.
  - Some factual questions coded binary (0 or 4); others use the full 0–4 range.
- Aggregation:
  - Sub-indices and overall TAQI constructed by simple unweighted averaging (arithmetic mean).
  - Robustness checks included TAQI2 (equal weighting of 33 dimensions) and TAQI-PCA (principal components analysis using the first principal component).
- Reliability and correlation statistics reported:
  - average correlation among the four sub-indices is below 0.5;
  - coefficient of reliability for the overall index is 0.8;
  - average intra-sub-index correlations range from 0.4 to 0.5;
  - associated reliability coefficient estimates range from 0.7 to 0.8.
- TADAT assessments:
  - TADAT is a global tool initiated in 2013;
  - assessments are currently available for over 37 countries;
  - a total of 47 measurement dimensions are taken into account in a complete TADAT assessment, of which 33 were used in TAQI construction.

### Empirical findings linking accountability & transparency (and broader TAQI) to firm performance
- Data and sample:
  - TAQI merged with firm-level data from the World Bank Enterprise Surveys (ES).
  - Dataset: cross-section of firms from 21 countries surveyed between 2013 and 2016 (countries listed in source).
  - ES targets firms with at least 5 employees.
  - In the sample:
    - 52 percent of firms are small (fewer than 20 employees);
    - 21 percent are young (younger than 7 years);
    - correlation between small and young firms is 0.16;
    - over 50 percent of firms operate in manufacturing;
    - 32 percent of firms report tax administration as a major obstacle to growth;
    - 10 percent of firms are government-owned;
    - 12 percent have foreign ownership;
    - 17 percent are exporters.
  - The dummy for firms reporting tax administration as a major obstacle has correlation with TAQI of less than .1.
- Baseline associations:
  - Small firms are on average 23 percent less productive than larger firms.
  - Young firms are on average 18 percent less productive than older firms.
  - Interaction of SMALL (or YOUNG) with TAQI (and sub-indices including Accountability and Transparency) is positive and statistically significant:
    - improvements in tax administration quality mitigate adverse productivity effects of being small or young.
- Magnitude examples:
  - For a country with weak tax administration (TAQI score of 1.39, the 25th percentile), productivity of small firms is on average 45 percent lower than that of larger firms.
  - If TAQI increases by one standard deviation (0.681), the productivity gap for small firms falls so that small firms would be only 6 percent lower than larger firms.
  - Improving from Liberia’s TAQI score of 0.73 to Zambia’s score of 2.33 could eliminate 81 percent of the productivity gap between small and larger firms.
- Sub-index effects:
  - Interactions of firm size with each sub-index (supporting taxpayer information TA_SUB1; filing and payment TA_SUB2; post-filing processes TA_SUB3; accountability and transparency TA_SUB4) are positive and statistically significant.
  - Magnitude highest for post-filing processes, but coefficient differences across sub-indices are not statistically different (t-test).
- Alternative measures and extensions:
  - Results robust to TAQI-PCA construction and to TAQI2.
  - RA-FIT extension: replacing TAQI with average electronic filing percentage (RA-FIT) across major tax types:
    - expanded sample of 30 countries and almost 16,000 firms;
    - electronic filing rate shows differential and significant effects on firm performance similar to TAQI results.

### Policy implications and recommendations
- Enhancing tax administration quality can disproportionately benefit small and young firms by lowering fixed components of tax compliance costs.
- Policy focus areas to lower compliance burdens include:
  - enhancing taxpayer information and taxpayer services;
  - simplifying filing and payment processes and promoting electronic filing and payment systems;
  - improving post-filing processes, including efficient VAT refund processing, risk-based audits, effective use of third-party information and big data analytics, and fair and independent dispute resolution mechanisms;
  - strengthening accountability and transparency: external oversight, independent investigation mechanisms, staff integrity and internal assurance, and timely public disclosure of performance and future directions.
- These administrative reforms are an alternative or complement to simplified small-business tax regimes, and may be particularly effective in helping small firms grow without the revenue risks that some simplified regimes pose.

### Caveats and limitations
- TAQI does not capture special tax regimes for small firms; if such regimes lower compliance costs, the reported effects of TAQI on small-firm productivity may be underestimated.
- Firm-level data are confined to the formal sector (firms with at least 5 employees); effects on micro-enterprises (fewer than 5 employees), voluntary formalization, and informal-sector dynamics are not examined.
- TADAT assessments are expert-based and in many cases confidential, restricting presentation of country-specific TAQI scores in the source.
- Some aspects of e-filing can increase compliance costs if mandatory without optionality, combined with paper reporting, or implemented with complex procedures.

*Source: IMF Working Paper — "4. Accountability and Transparency" (wp1795 - 4. Accountability and Transparency)*

### REFERENCES

### REFERENCES (wp1795)

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- Keen, M., and J. Slemrod, 2017, “Optimal Tax Administration,” IMF Working Paper WP/17/08.
- Khwaja, M. S., R. Awasthi, and J. Loeprick, 2011, “Risk-Based Tax audits – Approaches and Country Experiences,” (Washington: World Bank).
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### Empirical Tables — Key Statistics and Findings
- Table 1. Index Inter-Item Correlations
  - TA-SUB1: Average Inter-Item Correlation 0.38; No. of Components 7; Scale Reliability Coefficient 0.65
  - TA-SUB2: Average Inter-Item Correlation 0.52; No. of Components 6; Scale Reliability Coefficient 0.77
  - TA-SUB3: Average Inter-Item Correlation 0.38; No. of Components 13; Scale Reliability Coefficient 0.65
  - TA-SUB4: Average Inter-Item Correlation 0.51; No. of Components 7; Scale Reliability Coefficient 0.76
  - TAQI (average): Average Inter-Item Correlation 0.45; No. of Components 4; Scale Reliability Coefficient 0.76

- Table 2. Spearman Rank Correlation Between Alternative Indices (selected entries)
  - TAQI with TAQI2: 0.99
  - TAQI with TA-PCA: 0.96
  - TAQI2 with TA-PCA: 0.95

- Table 3. Summary Statistics of Firm-Level Variables (N = 11,354 unless shown)
  - EXPORTER: Min 0; Mean 0.174; Median 0; Max 1; Std. dev. 0.379; N 11,354
  - FOREIGN: Min 0; Mean 0.122; Median 0; Max 1; Std. dev. 0.327; N 11,354
  - GOV: Min 0; Mean 0.0163; Median 0; Max 1; Std. dev. 0.127; N 11,354
  - GROWTH: Min -69.93; Mean 10.70; Median -2.599; Max 95.36; Std. dev. 59.05; N 11,354
  - LAB PROD: Min -1.901; Mean 8.798; Median 8.679; Max 18.43; Std. dev. 2.205; N 11,354
  - MANUFACTURING: Min 0; Mean 0.542; Median 1; Max 1; Std. dev. 0.498; N 11,354
  - PERCEPTION: Min 0; Mean 0.311; Median 0; Max 1; Std. dev. 0.463; N 11,354
  - SMALL: Min 0; Mean 0.530; Median 1; Max 1; Std. dev. 0.499; N 11,354
  - TFP: Min -1.696; Mean 4.825; Median 4.676; Max 15.90; Std. dev. 1.168; N 3,883
  - YOUNG: Min 0; Mean 0.209; Median 0; Max 1; Std. dev. 0.407; N 11,354

- Table 4. Summary Statistics of Country-Level Variables (N varies)
  - TAQI: Min 0.557; Mean 1.751; Median 1.986; Max 2.738; Std. dev. 0.681; N 21
  - TAQI2: Min 0.333; Mean 1.722; Median 1.867; Max 2.800; Std. dev. 0.758; N 21
  - TA-SUB1: Min 0.380; Mean 2.269; Median 2.445; Max 3.620; Std. dev. 0.974; N 21
  - TA-SUB2: Min 0; Mean 1.581; Median 1.557; Max 3.778; Std. dev. 1.059; N 21
  - TA-SUB3: Min 0.205; Mean 1.414; Median 1.537; Max 2.425; Std. dev. 0.646; N 21
  - TA-SUB4: Min 0; Mean 1.741; Median 1.713; Max 3.810; Std. dev. 0.899; N 21
  - CIT: Min 10; Mean 21.95; Median 21; Max 35; Std. dev. 9.128; N 20
  - VAT: Min 6; Mean 15.82; Median 16; Max 20; Std. dev. 3.870; N 19
  - STPR: Min 0; Mean 0.375; Median 0; Max 1; Std. dev. 0.500; N 16
  - RAFIT: Min 10; Mean 24.27; Median 25; Max 35; Std. dev. 8.254; N 30

- Regression results — selected baseline and interaction coefficients (standard errors in brackets; significance indicated in tables)
  - Table 5 / 6 (Baseline – Size and Age): Dependent variables include Labor productivity, Sales growth, Total factor productivity.
    - SMALL coefficients:
      - Labor productivity (column 1): -0.226*** [0.048]
      - Labor productivity (column 2): -1.230*** [0.163]
      - Sales growth (column 3): -10.933** [4.298]
      - Total factor productivity (column 4): -0.634*** [0.141]
    - YOUNG coefficients:
      - Labor productivity (col 1): -0.179*** [0.042]
      - Labor productivity (col 2): -0.163*** [0.041]
      - Sales growth (col 3): 36.903*** [3.122]
      - Total factor productivity (col 4): -0.052 [0.054]
    - EXPORTER: 0.321*** [0.060] (labour productivity)
    - FOREIGN: 0.312*** [0.083] (labour productivity)
    - SMALL x TAQI:
      - 0.563*** [0.088] (Labor productivity)
      - 7.013*** [2.311] (Labor productivity alternative specification)
    - YOUNG x TAQI:
      - 0.190*** [0.065] (Labor productivity)
      - 9.499*** [3.354] (Labor productivity alternative)

  - Table 7. Inclusion of Tax Policy Parameters (Dependent Variable: Labor Productivity)
    - SMALL coefficients vary across specifications:
      - (1): -0.508** [0.240]
      - (2): -0.783*** [0.227]
      - (3): -1.300*** [0.222]
      - (4): -0.223*** [0.050]
      - (5): -0.204*** [0.050]
      - (6): -0.163*** [0.050]
    - SMALL x CIT: -0.020*** [0.006]
    - SMALL x TAQI: 0.426*** [0.089]; 0.478*** [0.085]; 0.582*** [0.106] (across columns)
    - SMALL x VAT: -0.021** [0.010]
    - YOUNG x CIT: -0.009* [0.005]
    - YOUNG x TAQI: 0.126* [0.074]; 0.174** [0.082]; 0.195** [0.095]
    - YOUNG x VAT: -0.022** [0.011]
    - YOUNG x STPR: 0.185** [0.087]
    - Observations range: 9,455 to 10,883; Adj. R-squared range: 0.581 to 0.591

  - Table 8. Inclusion of World Bank Governance Indicators (Dependent Variable: Labor Productivity)
    - SMALL coefficients:
      - (1): -0.831*** [0.217]
      - (2): -0.906*** [0.211]
      - (3): -1.077*** [0.206]
      - (4): -0.225*** [0.048]
      - (5): -0.225*** [0.048]
      - (6): -0.224*** [0.047]
    - YOUNG coefficients include large negative estimates in some specifications (e.g., -0.784*** [0.150], -0.663*** [0.150], -0.860*** [0.148]).
    - SMALL x TAQI: 0.395*** [0.104]; 0.419*** [0.104]; 0.503*** [0.093]
    - SMALL x GOV-EFFECT: 0.262*** [0.099]
    - SMALL x REG-QUALITY: 0.237** [0.104]
    - YOUNG x TAQI: 0.297*** [0.073]; 0.257*** [0.075]; 0.321*** [0.068]
    - YOUNG x GOV-EFFECT: -0.223*** [0.082]
    - YOUNG x RULE-LAW: -0.326*** [0.096]
    - Observations: 11,354; Adj. R-squared: 0.580–0.585

  - Table 9. Robustness Checks (Dependent Variable: Labor Productivity)
    - SMALL: -1.143*** [0.174]; -1.584*** [0.215]; -1.019*** [0.157] (across columns)
    - LARGE: 0.632*** [0.219] (one specification)
    - YOUNG: -0.134*** [0.041]; -0.092 [0.058]; -0.209*** [0.042]; -0.199*** [0.042]; -0.166*** [0.041]
    - SMALL x TAQI: 0.508*** [0.094]; 0.706*** [0.114]; 0.430*** [0.083]
    - Alternative SME, SMALL2, LARGE interactions reported with significant coefficients in specified columns.
    - Observations vary by column; Adjusted R-squared range: 0.577 to 0.594

  - Table 11. Robustness - Measurement of Tax Administration (Dependent Variable: Labor Productivity)
    - SMALL consistently negative and significant across columns (e.g., -0.224*** [0.048])
    - YOUNG estimates vary (e.g., -0.167*** [0.041]; -0.293** [0.117]; -0.320*** [0.078]; -0.565*** [0.094])
    - YOUNG x TA-PCA: 0.091*** [0.029]
    - YOUNG x TA-SUB2: 0.102*** [0.039]
    - YOUNG x TA-SUB3: 0.271*** [0.061]
    - SMALL x TA-PCA: 0.247*** [0.038]
    - SMALL x TA-SUB3: 0.454*** [0.079]
    - Observations: 11,354; Adj. R-squared ~0.579–0.584

  - Table 12. Extension Using RA-FIT Data (Dependent Variable: Labor Productivity)
    - Sample: Observations 15,816; # of countries: 30; # of industries: 23
    - SMALL:
      - (1): -0.606*** [0.071]
      - (2): -0.561*** [0.077]
      - (4): -0.370*** [0.031]
      - (5): -0.362*** [0.031]
      - (6): -0.360*** [0.031]
    - YOUNG: coefficients include -0.070 [0.105]; -0.089 [0.094]; -0.067 [0.112]; -0.405*** [0.087]; -0.390*** [0.084]
    - EXPORTER: 0.385*** [0.034] to 0.424*** [0.032]
    - FOREIGN: 0.530*** [0.044] to 0.543*** [0.045]
    - SMALL x E-FILING: 0.066*** [0.019]; 0.055*** [0.020]
    - YOUNG x E-FILING: 0.135*** [0.037]; 0.123*** [0.035]
    - YOUNG2: -0.484*** [0.095]; YOUNG2 x E-FILING: 0.050** [0.025]
    - R-squared range: 0.442 to 0.471

### Notes on Statistical Reporting
- Significance notation used throughout: *** p<0.01, ** p<0.05, * p<0.1.
- Standard errors are clustered by industry & country in reported specifications.
- A constant is included in all specifications but not shown in the tables.
- Number of countries, industries, firms, and observations are reported per table/column where applicable.

*Source: wp1795 - REFERENCES (wp1795 - REFERENCES; https://www.imf.org/-/media/files/publications/wp/2017/wp1795.pdf)*

### APPENDIX 1. SCORING METHODOLOGY FOR EACH DIMENSION BY AREA

### APPENDIX 1. SCORING METHODOLOGY FOR EACH DIMENSION BY AREA

### Supporting Taxpayer Information (Table A1)
- The range of information available to taxpayers to explain, in clear terms, what their obligations and entitlements are in respect of each core tax.
  - A/4: (i) Information on the main areas of taxpayer obligations (registration, filing, payment, and reporting of information in tax declarations) and entitlements is readily available in respect of all core taxes. (ii) Information is tailored to the needs of key taxpayer segments, key industry groups, intermediaries, and disadvantaged groups.
  - B/2.67: (i) Same as A (i). (ii) Information is tailored to the needs of at least one taxpayer segment or industry group, and tax intermediaries.
  - C/1.33: Same as A (i).
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The degree to which information is current in terms of the law and administrative policy.
  - A/4: (i) Procedures are in place, and dedicated technical staff are assigned, to ensure information is current. (ii) Taxpayers are made aware of changes in the law or administrative policy through targeted and general communication before the law or policy takes effect.
  - B/2.67: (i) Same as A (i). (ii) Taxpayers are made aware of changes in the law or administrative policy through general communication before the law or policy takes effect.
  - C/1.33: (i) Ad hoc actions are taken to update information. (ii) Taxpayers are not always alerted to changes in the law or administrative policy before the law or policy takes effect.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The ease by which taxpayers obtain information from the tax administration.
  - A/4: (i) The tax administration provides a broad range of proactive taxpayer education programs. (ii) Information is available through a variety of user-friendly service delivery channels (e.g., telephone, website, etc.) (iii) Information is available at minimal or no cost to taxpayers and intermediaries. (iv) Information and self-service facilities are available to taxpayers and intermediaries at a time convenient to them.
  - B/2.67: (i) The tax administration provides public education programs for micro, small and new firms, and first-time employers. (ii) Same as A (ii). (iii) Same as A (iii).
  - C/1.33: (i) Public education programs are undertaken on an ad hoc basis. (ii) Same as A (ii). (iii) Same as A (iii).
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The time taken to respond to taxpayer and intermediary requests for information.
  - A/4: At least 70 percent of telephone enquiry calls are answered within 6 minutes’ waiting time.
  - B/2.67: At least 60 percent of telephone enquiry calls are answered within 6 minutes’ waiting time.
  - C/1.33: At least 50 percent of telephone enquiry calls are answered within 6 minutes’ waiting time.
  - D/0: The requirements for a ‘C’ rating or higher are not met, or the information available to the TADAT assessors is insufficient to allow an assessment to be made.

- The extent of initiatives to reduce taxpayer compliance costs.
  - A/4: (i) Simplified record keeping and reporting arrangements exist for small taxpayers. (ii) Frequently asked questions and common misunderstandings of the law detected through service and verification activities are routinely analyzed to improve information products and services. (iii) Secure online facilities provide taxpayers with 24-hour access to registration and tax account details. (iv) Tax declarations and other forms are reviewed regularly to ensure that only information that is needed and used is sought from taxpayers.
  - B/2.67: Same as A (i) except that pre-filling of tax declarations may not be present, A (ii), and A (iii).
  - C/1.33: Same as A (i) except that pre-filling of tax declarations may not be present. Same as A (ii).
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The use and frequency of methods to obtain feedback from taxpayers on the standard of services provided.
  - A/4: (i) The tax administration regularly obtains feedback from taxpayers. (ii) A survey—based on a statistically valid sample of key taxpayer segments—is conducted by an independent third party at least once every 3 years to monitor trends in taxpayer perceptions of tax administration services and products.
  - B/2.67: (i) Same as A (i). (ii) Same as A (ii) except that surveys are conducted on a less regular basis (i.e., at least once every 5 years) and may be undertaken solely by the tax administration.
  - C/1.33: (i) Feedback is obtained, but on an ad hoc basis. (ii) Same as B(ii) except that surveys are conducted on an ad hoc basis or not based on statistically valid sample.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The extent to which taxpayer input is taken into account in the design of administrative processes and products.
  - A/4: (i) The tax administration regularly consults with key taxpayer groups and intermediaries to identify deficiencies in administrative processes and products. (ii) There is active involvement of taxpayers and intermediaries in the design and/or testing of new processes and products.
  - B: Same as A (i).
  - C: The tax administration consults on an ad hoc basis with key taxpayer groups and intermediaries to identify deficiencies in processes and products.
  - D: The requirements for a ‘C’ rating or higher are not met.

### Filing and Paying (Table A2)
- The number of CIT declarations filed by the statutory due date as a percentage of the number of declarations expected from registered CIT taxpayers.
  - A/4: (i) The ratio is 90 percent and above in respect of all taxpayers for which a CIT declaration is expected. (ii) The ratio is at least 99 percent for all large taxpayers in respect of which a CIT declaration is expected.
  - B/2.67: (i) The ratio is 75 percent and above up to 90 percent in respect of all taxpayers for which a CIT declaration is expected. (ii) The ratio is at least 95 percent for all large taxpayers in respect of which a CIT declaration is expected.
  - C/1.33: (i) The ratio is 50 percent and above up to 75 percent in respect of all taxpayers for which a CIT declaration is expected. (ii) The ratio is at least 90 percent for all large taxpayers in respect of which a CIT declaration is expected.
  - D/0: The requirements for a ‘C’ rating or higher are not met, or the information available to the TADAT assessors is insufficient to allow an assessment to be made.

- The number of PIT declarations filed by the statutory due date as a percentage of the number of declarations expected from registered PIT taxpayers.
  - A/4: The ratio is 90 percent and above.
  - B/2.67: The ratio is 75 percent and above up to 90 percent.
  - C/1.33: The ratio is 50 percent and above up to 75 percent.
  - D/0: The requirements for a ‘C’ rating or higher are not met, or the information available to the TADAT assessors is insufficient to allow an assessment to be made.

- The number of VAT declarations filed by the statutory due date as a percentage of the number of declarations expected from registered VAT taxpayers.
  - A/4: (i) The ratio is 90 percent and above in respect of all taxpayers for which a VAT declaration is expected. (ii) The ratio is at least 99 percent for all large taxpayers in respect of which a VAT declaration is expected.
  - B/2.67: (i) The ratio is 75 percent and above up to 90 percent in respect of all taxpayers for which a VAT declaration is expected. (ii) The ratio is at least 95 percent for all large taxpayers in respect of which a VAT declaration is expected.
  - C/1.33: (i) The ratio is 50 percent and above up to 75 percent in respect of all taxpayers for which a VAT declaration is expected. (ii) The ratio is at least 90 percent for all large taxpayers in respect of which a VAT declaration is expected.
  - D/0: The requirements for a ‘C’ rating or higher are not met, or the information available to the TADAT assessors is insufficient to allow an assessment to be made.

- The number of PAYE withholding declarations filed by employers by the statutory due date as a percentage of the number of PAYE declarations expected from registered employers.
  - A/4: The ratio is 90 percent and above.
  - B/2.67: The ratio is 75 percent and above up to 90 percent.
  - C/1.33: The ratio is 50 percent and above up to 75 percent.
  - D/0: The requirements for a ‘C’ rating or higher are not met, or the information available to the TADAT assessors is insufficient to allow an assessment to be made.

- The extent to which tax declarations are filed electronically.
  - A/4: (i) At least 85 percent of declarations are filed electronically for each of the core taxes. (ii) All large taxpayers file core tax declarations electronically.
  - B/2.67: (i) At least 70 percent of declarations are filed electronically for each of the core taxes. (ii) At least 80 percent of large taxpayers file core tax declarations electronically.
  - C/1.33: At least 50 percent of declarations are filed electronically for at least two core taxes.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The extent to which core taxes are paid electronically.
  - A/4: Electronic payments account for more than 75 percent of the value of total tax collections for each of CIT, PIT, VAT, and PAYE.
  - B/2.67: Electronic payments account for more than 50 percent of the value of total tax collections for each of CIT, PIT, VAT, and PAYE.
  - C/1.33: Electronic payment facilities are used for at least one of the 4 core taxes.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

### Postfiling Processes (Table A3)
- The extent of initiatives to detect businesses and individuals who are required to register but fail to do so.
  - A/4: (i) The tax administration’s annual operational plans specify initiatives to detect unregistered businesses and individuals, including at least: a. Systematic use of third party information sources; and b. A program of inspections of business premises and traders. (ii) Evidence exists of actions and results during the past year in detecting unregistered businesses and individuals.
  - B/2.67: (i) Same as A (i) (a). (ii) Same as A (ii).
  - C/1.33: Evidence exists of ad hoc actions and results during the past year in relation to detecting unregistered taxpayers.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The extent of intelligence gathering and research to identify compliance risks in respect of the main tax obligations.
  - A/4: The tax administration builds knowledge of compliance levels and current and emerging risks by: (i) Analyzing the results of environmental scans undertaken by the tax administration as part of its multi-year strategic planning; (ii) Gathering and interpreting data from a range of external sources; (iii) Gathering and interpreting data from a range of internal sources including different studies and research.
  - B/2.67: The tax administration builds knowledge of compliance levels and risks by: same as A (ii) and (iii).
  - C/1.33: The tax administration’s intelligence gathering and research initiatives are less comprehensive and mostly limited to internal data sources.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The process used to assess, rank, and quantify taxpayer compliance risks.
  - A/4: A structured risk assessment process—of the kind described in contemporary management literature and/or depicted, for example, in IMF and OECD publications as suitable for use by tax administrations—is in place as part of a multi-year strategic planning process to assess and prioritize compliance risks for all core taxes, the four main compliance obligations, and key taxpayer segments.
  - B/2.67: Similar to A, except that the risk assessment process is not part of a multi-year strategic planning process. The process is, however, linked to the tax administration’s broader annual business planning.
  - C/1.33: A less structured risk assessment process is in place to assess and prioritize compliance risks for all core taxes and the four main compliance obligations.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The nature and scope of the tax audit program in place to detect and deter inaccurate reporting.
  - A/4: The tax administration’s audit program: (i) Covers all core taxes. (ii) Covers key taxpayer segments, weighted towards large taxpayers and other high-risk segments and economic sectors. (iii) Selects audit cases centrally on the basis of assessed risks. (iv) Uses a range of audit types, and audit methodologies (i.e. direct and indirect). (v) Routinely evaluates the impact of audits on levels of taxpayer compliance.
  - B/2.67: The tax administration’s audit program: (i) Same as A (i). (ii) Covers key taxpayer segments, weighted towards at least large taxpayers. (iii) Same as A (iii). (iv) Same as A (iv).
  - C/1.33: (i) The tax administration’s audit program: (ii) Same as A (i). (iii) Selects audit cases on the basis of assessed risks in a decentralized manner. (iv) Uses a range of audit types.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The extent of large-scale automated crosschecking to verify information reported in tax declarations.
  - A/4: There is large-scale automated crosschecking of amounts reported in PIT and CIT declarations with information from all of the following sources: (i) VAT declarations. (ii) Banks/financial institutions. (iii) Employers. (iv) Three or more Government agencies). (v) Stock exchanges and/or shareholder registries of listed companies. (vi) Social security agency or agencies (for purposes of crosschecking reported employment income). (vii) Online (internet-based) vendors.
  - B/2.67: There is large-scale automated crosschecking of amounts reported in PIT and CIT declarations with information from A (i), (ii), (iii), and (iv).
  - C/1.33: There is large-scale automated crosschecking of amounts reported in PIT and CIT declarations with information from, at least, VAT declarations, employers, and two Government agencies.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The nature and scope of proactive initiatives undertaken to encourage accurate reporting.
  - A/4: (i) A system of public and private binding rulings is in place. (ii) Cooperative compliance arrangements are entered into with qualifying taxpayers.
  - B/2.67: Same as A (i).
  - C/1.33: A system of public binding rulings is in place.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The extent to which an appropriately graduated mechanism of administrative and judicial review is available to, and used by, taxpayers.
  - A/4: (i) A tiered review mechanism of the following kind exists: a. First stage—independent single (i.e. not multi-layered) administrative review process within the tax administration. b. Second stage—review by an independent external specialist tax tribunal, review board or committee, or court where the taxpayer is dissatisfied with the outcome of an administrative review. An alternative fast-track dispute resolution process involving arbitration may also be in place. c. Final stage—review by a higher court to resolve remaining disputes concerning legal interpretation and facts. (ii) Taxpayers use the formal dispute process.
  - B/2.67: (i) The tiered review mechanism described in A (i) is in place with the exception that either the administrative review process within the tax administration is multi-layered or an independent external specialist tax tribunal, review board or committee, or court does not exist and generalist lower courts provide the first avenue of appeal for a taxpayer dissatisfied with the outcome of the administrative review process. (ii) Same as A (ii).
  - C/1.33: (i) The tiered review mechanism described in A (i) is in place but the administrative review process within the tax administration is multi-layered and there is no independent external specialist tax tribunal, review board or committee, or court. (ii) Same as A (ii).
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- Whether the administrative review mechanism is independent of the audit process.
  - A/4: (i) An administrative review unit that is physically and organizationally independent of the audit department conducts all administrative reviews. (ii) Objective review procedures are documented and applied.
  - B/2.67: (i) Designated review officers located in the audit department conduct all administrative reviews. (ii) Same as A (ii).
  - C/1.33: (i) Administrative reviews are conducted by auditors separate from those involved in the audit of the taxpayer. (ii) Same as A (ii).
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- Whether information on the dispute resolution process is published, and whether taxpayers are explicitly made aware of it.
  - A/4: (i) General information on taxpayer dispute rights and the dispute resolution process is publicly available (e.g., on the tax administration’s website). (ii) Auditors are required by written instruction to explicitly inform taxpayers of their dispute rights and the associated dispute procedures. (iii) Information on dispute rights and associated dispute procedures is specifically included in audit finalization letters, notices of assessment, and notifications of administrative review outcomes.
  - B/2.67: (i) Same as A (i). (ii) Same as A (iii).
  - C/1.33: Same as A (i).
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The time taken to complete administrative reviews.
  - A/4: The administrative review stage is completed for at least 90 percent of cases within the lower of 30 calendar days or the statutory deadline.
  - B/2.67: The administrative review stage is completed for at least 90 percent of cases within the lower of 60 calendar days or the statutory deadline.
  - C/1.33: The administrative review stage is completed for at least 90 percent of cases within the lower of 90 calendar days or the statutory deadline.
  - D/0: The requirements for a ‘C’ rating or higher are not met, or the information available to the TADAT assessors is insufficient to allow an assessment to be made.

- The extent to which the tax administration responds to dispute outcomes.
  - A/4: There is regular monitoring and analysis of dispute outcomes which is taken into account in the formulation or adjustment of policy, legislation, and administrative procedures.
  - B/2.67: Dispute outcomes of a material nature are analyzed. This analysis is taken into account in the formulation or adjustment of policy, legislation, and administrative procedures.
  - C/1.33: Some ad hoc analysis of dispute outcomes is undertaken. Some examples exist in the past 3 years where this analysis has been taken into account in the formulation or adjustment of policy, legislation, and administrative procedures.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

### Accountability and Transparency (Table A4)
- Assurance provided by internal audit.
  - A/4: (i) The tax administration has an organizationally independent internal audit unit reporting directly to an audit committee. (ii) There is an annual internal audit plan comprising internal control checks, operational performance audits, information technology systems audits and financial audits. The program provides wide coverage and scrutiny of key operations, revenue accounting, and internal financial management. (iii) There is regular training of internal auditors in audit methodologies. (iv) There is independent review of internal audit operations and systems at least every five years. (v) There is a central repository of internal control policies, processes and procedures. (vi) IT system controls are in place to detect incidents that threaten the confidentiality and integrity of tax administration data. Specifically, audit trails of user access and changes made to taxpayer data exist, together with effective surveillance by internal audit, including through use of system-generated reports and other audit tools.
  - B/2.67: (i) The tax administration has an organizationally independent internal audit unit reporting directly to the tax administration head or board. (ii) Same as A (ii). (iii) Same as A (iii). (iv) There is an independent review of internal audit operations and systems at least every seven years. (v) Internal control policies, processes, and procedures are adequately documented. (vi) Same as A (vi).
  - C/1.33: (i) There is an internal audit function but it does not report directly to the tax administration head or board. (ii) There is an annual internal audit plan covering, as a minimum, internal control checks and financial audits (the plan may not include operational performance audits or information systems audits). (iii) Internal auditors are given ad hoc training in audit methodologies. (iv) Audit trails of user access and changes made to taxpayer data exist.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- Staff integrity assurance mechanisms.
  - A/4: (i) The tax administration has an organizationally independent internal affairs or equivalent unit. It reports directly to the tax administration head or deputy head in recognition of the sensitive nature of its responsibilities. (ii) The internal affairs or equivalent unit: a. Has appropriate investigative powers, and exercises these powers with due process; b. Provides leadership to the formulation of integrity and ethics policy, including codes of conduct; c. Cooperates with relevant enforcement agencies (e.g., anti-corruption agency, police, and public prosecutor); d. Maintains integrity-related statistics for the organization, while preserving confidentiality; and e. The integrity statistics are publicly reported.
  - B/2.67: (i) Same as A (i). (ii) Same as A (ii) (a), (b) and (c).
  - C/1.33: (i) The tax administration has an internal affairs unit but it does not report directly to the tax administration head or deputy head. (ii) Same as A (ii) (a).
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The extent of independent external oversight of the tax administration’s operations and financial performance.
  - A/4: (i) There is an annual audit of the tax administration’s financial statements by an external review body (e.g., government auditor or other independent entity). (ii) There is an annual program of operational performance audits by an external review body (e.g., government auditor). (iii) External review findings are responded to by the tax administration. (iv) External review findings and the response of the tax administration or Ministry of Finance to the findings are publicly reported.
  - B/2.67: (i) Same as A (i). (ii) Same as A (ii). (iii) Same as A (iii).
  - C/1.33: (i) Same as A (i). (ii) Same as A (iii).
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The investigation process for suspected wrongdoing and maladministration.
  - A/4: (i) An ombudsman or equivalent authority routinely investigates complaints from taxpayers about treatment they have received from the tax administration. (ii) Systemic problems identified by the ombudsman, and recommended actions to fix them, are reported to the tax administration and government. (iii) An anti-corruption agency oversees tax administration anti-corruption policies and investigates the most serious cases of alleged corrupt conduct of tax officials. (iv) There is regular (e.g., monthly) and systematic monitoring and reporting to senior management of actions taken in response to recommendations of the tax ombudsman and anti-corruption agency.
  - B/2.67: (i) Same as A (i). (ii) Same as A (iii). (iii) Same as A (iv).
  - C/1.33: (i) An ombudsman or equivalent authority exists but investigates, on an ad hoc basis only, complaints from taxpayers about treatment they have received from the tax administration. (ii) An anti-corruption agency exists and investigates cases of alleged corrupt conduct of tax officials, but does not oversee the tax administration’s anti-corruption policies. (iii) There is limited evidence that findings and recommendations on corruption and maladministration are acted upon systematically by the tax administration.
  - D/0: The minimum performance requirements described in ‘C’ above are not met.

- The mechanism for monitoring public confidence in the tax administration.
  - A/4: (i) An independent third party conducts a survey—based on a statistically valid sample of key taxpayer segments—at least every 2 years to monitor trends in public confidence in the tax administration. (ii) The results of the survey are made public within 6 months of completion. (iii) The tax administration takes the survey results into account in reviewing its integrity framework and public relations campaigns.
  - B/2.67: (i) An independent third party conducts a survey—based on a statistically valid sample of key taxpayer segments—at least every 3 years to monitor trends in public confidence in the tax administration. (ii) The results of the survey are made public within 9 months of completion. (iii) The tax administration takes the survey results into account in reviewing its integrity framework.
  - C/1.33: A survey—based on a statistically valid sample of the taxpayer population—is conducted at least every 4 years to monitor trends in public confidence in the tax administration. The survey may be conducted by an independent third party or by the tax administration itself.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The extent to which the financial and operational performance of the tax administration is made public, and the timeliness of publication.
  - A/4: (i) There is an annual report to government outlining the full financial and operational performance of the tax administration. (ii) The annual report is made public within 6 months of the end of the fiscal year.
  - B/2.67: (i) Same as A (i). (ii) The annual report is made public within 9 months of the end of the fiscal year.
  - C/1.33: (i) Same as A (i). (ii) The annual report is made public within 12 months of the end of the fiscal year.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

- The extent to which the tax administration’s future directions and plans are made public, and the timeliness of publication.
  - A/4: Strategic and operational plans are made public in advance of the period covered by the plans.
  - B/2.67: Strategic and operational plans are made public within 3 months of the commencement of the period covered by the plans.
  - C/1.33: Elements of the plans are made public within 3 months of the commencement of the period covered by the plans.
  - D/0: The requirements for a ‘C’ rating or higher are not met.

*Source: APPENDIX 1. SCORING METHODOLOGY FOR EACH DIMENSION BY AREA (wp1795).*

### APPENDIX 2. VARIABLES, DEFINITIONS AND DATA SOURCES

### APPENDIX 2. VARIABLES, DEFINITIONS AND DATA SOURCES

### Firm-level performance and characteristics
- LAB_PROD — Sales per employee (log). Source: ES
- TFP_LP — Total factor productivity based on Levinsohn and Petrin estimator (log). Source: ES
- GROWTH — Total real growth of firm sales in percent over last 3 years (using variables containing contemporaneous sales and sales from 3 years ago); winsorized at the bottom 10th and the top 90th percentiles. Source: ES
- SME — Dummy (1 if firm has fewer than 100 employees). Source: ES
- SMALL — Dummy (1 if firm has fewer than 20 employees). Source:
- SMALL2 — Dummy (1 if number of employees divided by country-sector mean below 25th percentiles across all firms and countries). Source:
- LARGE — Dummy (1 if firm has at least 100 employees). Source:
- YOUNG — Dummy (1 if firm is younger than 7 years which corresponds to 25th percentile of age distribution in whole sample). Source: ES
- YOUNG2 — Dummy (1 if firm is younger than 5 years). Source:
- GOV — Dummy (1 if firm is at least partially government owned). Source: ES
- EXPORTER — Dummy (1 if firm exports). Source: ES
- FOREIGN — Dummy (1 if firm is partially foreign owned). Source: ES
- PERCEPTION — Dummy (1 if firm perceives tax administration as major constrained). Source: ES
- MANUFACTURING — Dummy (1 if firm is part of manufacturing sector). Source: ES

### Tax administration quality indices (TADAT)
- TAQI — Tax administration quality index (scale 0 to 4), sub-indices unweighted. Source: TADAT
- TAQI2 — Tax administration quality index (scale 0 to 4), sub-indices weighted. Source: TADAT
- TAQI-PCA — Tax administration quality index, first component from principal component analysis (scale 0 to 4) version 2. Source: TADAT
- TA-SUB1 — Tax administration quality sub-index for area 1 (scale 0 to 4). Source: TADAT
- TA-SUB2 — Tax administration quality sub-index for area 2 (scale 0 to 4). Source: TADAT
- TA-SUB3 — Tax administration quality sub-index for area 3 (scale 0 to 4). Source: TADAT
- TA-SUB4 — Tax administration quality sub-index for area 4 (scale 0 to 4). Source: TADAT

### Country-level tax variables and tax capacity
- VAT — Statutory standard VAT rate (in percent). Source: IMF
- CIT — Top statutory CIT rate (in percent). Source: IMF
- VATPROD — VAT collections by the multiple of GDP and the VAT rate. Source: USAID
- CITPROD — Total corporate income tax revenue divided by the multiple of GDP and the corporate income tax rate. Source: USAID
- STPR — Dummy (1 if country has small taxpayer regime). Source: KPMG

### Governance and regulatory quality indicators
- REG-QUALITY — Perception of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development. (-2.5 = weak to 2.5 = strong). Source: WGI
- GOV-EFFECT — Perception of the quality of public services, the quality of the civil service and the degree of its independence from political pressures etc. (-2.5 = weak to 2.5 = strong). Source: WGI
- RULE-LAW — Perception of the extent to which agents have confidence in and abide by the rules of society (-2.5 = weak to 2.5 = strong). Source: WGI

### Other administrative measures
- E-FILING — Average share of electronic filing across major tax types in percent (log). Source: RA-FIT

*Source: APPENDIX 2. VARIABLES, DEFINITIONS AND DATA SOURCES (wp1795)*

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_Source: https://www.imf.org/-/media/files/publications/wp/2017/wp1795.pdf_