Corruption, Taxes and Compliance
IMF Working Papers, November 17, 2017
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- Corruption, Taxes and Compliance
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Bibliographic details
- Authors: Anja Baum, Sanjeev Gupta, Elijah Kimani, Sampawende J Tapsoba
- Published: November 17, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484326039.001
Summary
- Paper revisits the effects of corruption on the state’s capacity to raise revenue, building on the existing empirical literature using new and more disaggregated data.
- Uses a comprehensive dataset for 147 countries spanning 1995-2014, compiled by the IMF.
- Finds that—consistent with the existing literature—corruption is negatively associated with overall tax revenue, and most of its components.
- Relationship is predominantly influenced by the way corruption interacts with tax compliance.
- The establishment of large taxpayer offices improves tax compliance by dampening the perception of corruption, thereby boosting revenue.
Key findings
- Corruption is negatively associated with overall tax revenue and most of its components.
- The interaction between corruption and tax compliance is the predominant channel through which corruption affects revenue.
- Establishment of large taxpayer offices is associated with improved tax compliance and increased revenue via reduced perception of corruption.
Policy recommendations and implications
- Strengthen institutions that improve tax compliance to mitigate the revenue-reducing effects of corruption.
- Consider establishing or expanding large taxpayer offices as a mechanism to dampen perceptions of corruption and boost revenue collection.
Data and scope
- Dataset covers 147 countries.
- Time span: 1995-2014.
- Compiled by the IMF.
Content in this bundle
- Corruption, Taxes and Compliance, WP/17/255, November 2017