A Time to Build: Does TA Matter for Revenue Mobilization?

IMF Working Papers, February 12, 2021

Source details

The paper uses a unique data set covering 115 countries, from 2000–18, and 5-year non-overlapping averages to explore the impact of technical assistance (TA) on revenue mobilization.
To the authors’ knowledge this is the first effort to determine a direct relationship between technical assistance and improvement in tax revenues.
Key empirical result: technical assistance significantly and positively increases tax revenues.
Both income per capita and openness were found to positively improve the tax ratio, consistent with prior literature.
Dynamic estimations uncovered a long-run relationship among technical assistance, income per capita, openness, and tax revenues, underscoring that it takes time to build capacity and institutional resilience.

Sample: 115 countries.
Time span: 2000–18.
Temporal aggregation: 5-year non-overlapping averages.
Estimation approach: static and dynamic estimations, including error correction and long-run coefficient analysis (as indicated by keywords such as error correction coefficient and long-run coefficient).

Countries: 115
Period: 2000–18
Temporal averaging: 5-year non-overlapping averages
Subject keywords: Corruption, Estimation techniques, Income, Revenue administration, Tax administration core functions
Methodological/technical keywords: error correction coefficient, long-run coefficient, order of magnitude, tax ratio, tax revenue variable

Technical assistance is an effective tool for revenue mobilization, producing significant and positive increases in tax revenues.
Improvements in income per capita and greater openness are associated with higher tax ratios, suggesting complementary channels for revenue gains.
The identified long-run relationship indicates that capacity building and institutional reforms take time; short-term evaluations may understate TA’s full impact.