Tax Administration and Firm Performance: New Data and Evidence for Emerging Market and Developing Economies
IMF Working Papers, April 14, 2017
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- Tax Administration and Firm Performance: New Data and Evidence for Emerging Market and Developing Economies
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Bibliographic details
- Authors: Era Dabla-Norris, Florian Misch, Duncan Cleary, Munawer Khwaja
- Published: April 14, 2017
- Series: IMF Working Papers
Summary and scope
- Paper examines how the quality of tax administration affects firm performance for a large sample of firms in emerging market and developing economies.
- Constructs a novel, internationally comparable, and multidimensional index of tax administration quality (the TAQI) using information from the Tax Administration Diagnostic Assessment Tool.
- Focuses on tax compliance costs, especially their disproportionate burden on small and young businesses.
- Authors: Era Dabla-Norris, Florian Misch, Duncan Cleary, Munawer Khwaja.
- Date: April 14, 2017.
- Publication: IMF Working Papers, Working Paper No. 2017/095, Issue: 095, Volume: 2017, Pages: 40, ISBN: 9781475595147, ISSN: 1018-5941.
Key findings
- Better tax administration attenuates the productivity gap of small and young firms relative to larger and older firms.
- The main result is robust to:
- controlling for other aspects of tax policy and of economic governance;
- alternative definitions of small and young firms;
- alternative measures of the quality of tax administration.
- Tax compliance costs tend to be disproportionately higher for small and young businesses.
- Improvement in tax administration can generate growth and productivity dividends by lowering compliance costs faced by firms.
Methods and data
- Development of the Tax Administration Quality Index (TAQI), a multidimensional measure based on the Tax Administration Diagnostic Assessment Tool.
- Analysis uses a large sample of firms in emerging market and developing economies.
- Empirical strategy compares productivity gaps between small/young and larger/older firms and evaluates how TAQI affects these gaps.
Policy implications and recommendations
- Countries can reap growth and productivity dividends from improvements in tax administration that lower compliance costs faced by firms.
- Policy emphasis on strengthening tax administration quality (as measured by TAQI) to reduce the disproportionate compliance burden on small and young firms.
Subject areas and keywords
- 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.
Source: Tax Administration and Firm Performance: New Data and Evidence for Emerging Market and Developing Economies, Era Dabla-Norris, Florian Misch, Duncan Cleary, and Munawer Khwaja, April 14, 2017 (IMF Working Paper No. 2017/095).