Tax Ratios and Tax Effort in Developing Countries, 1969-71

International Monetary Fund. Research Dept.
Published Date:
January 1975
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The major results of a study of tax ratios and tax effort in developing countries, undertaken by the Fund's Fiscal Affairs Department, were reported in Staff Papers, July 1971.1 The time-series section of the study was based on a comparison of data for 1953–55 with those for 1966–68 for a sample of 30 developing countries, while the cross-section analysis, based on averages for 1966–68, covered 50 countries. The study first outlined the major changes in the levels and composition of taxes between the periods 1953–55 and 1966–68 and then examined in detail the tax structure in the 50 countries in the latter period. More importantly, the study attempted to measure relative tax effort in the sample countries for the period 1966–68. For this purpose, regression analysis was used on the cross-section data to quantify the influence of objective conditions and economic factors on the tax ratio so that the residuals could be used with proper adjustments to construct indices of relative tax effort for developing countries.

Since the Fund staff and others have frequently used the results of the 1971 study, in assessing tax effort in several member countries, it has been considered desirable to update the study by using more recent data. A repeat study on data for a later period also enables a check to be made on the stability, over time, of the coefficients in the regression equations. This paper is basically designed to update the major results of the cross-section analysis of the 1971 study. An attempt was made to canvass data for the period 1969–71 for the same 50 countries 2 that were covered by the previous study; however, as adequate data could not be obtained for three of those countries (Chad, Somalia, and Viet-Nam), this study is based on a sample of 47 countries.

The most interesting general conclusion of this study is that the estimated coefficients of the explanatory variables in the alternative equations for the later period do not differ greatly from those in the corresponding equations for the earlier period, thereby adding to the degree of confidence in the results of the analysis. Also, in general, the ranking of countries with respect to tax effort in the two periods does not differ markedly.

In this paper, Section I indicates the sources and coverage of the data. Section II presents the basic figures on tax levels and re-estimates the equations contained in the previous study; these results are then used to derive more up-to-date indices of tax effort. Section III discusses the composition of tax revenues in the sample countries and the regional variations in tax levels and composition.

I. Coverage and Source of Data

As already stated, tax and other related data necessary for analysis were collected for 47 countries3 for the years 1969–71.4 The data were averaged for the three-year period, in order to minimize the influence of fortuitous factors.

Fiscal data were obtained from government sources, such as budget documents or reports of the comptroller general, from other official documents, such as central bank reports, and from unpublished figures supplied to the Fund. The classification of tax data is the same as in Chelliah (1971). Data on social security contributions were not available for some countries that have social security systems. In other cases, it was not possible to exclude contributions by the government as an employer. Hence, for purposes of all analysis, social security contributions are excluded when computing the tax ratio.5 However, for a rough comparison, two alternative ratios are presented for as many countries as possible (one including and the other excluding social security contributions).

National income data were taken mainly from the Fund's International Financial Statistics (IFS) and from the United Nations, Yearbook of National Accounts Statistics. In some cases, unpublished estimates available in the Fund have been used. Data on imports and exports were taken from IFS.

In a number of countries either GNP/GDP or total tax data for the years 1966–68 have been revised since 1971. In a few other countries, GNP data are now available where formerly only GDP data were available, or the coverage in terms of levels of government is not the same. In all these cases, in order to ensure comparability with data for the years 1969–71, tax ratios (excluding social security contributions) for the earlier period were recomputed using the revised data.6

II. Tax Ratios and Tax Effort

overall tax ratios

The 1971 study noted that tax ratios for developing countries had increased during the period 1953–55 to 1966–68.7 This trend continued after 1968; the average tax ratio (excluding social security contributions) for 1969—71 was 15.1 per cent, compared with 13.6 per cent for 1966–68. The tax ratio increased in almost 80 per cent of the countries that were covered in both periods. Given the limitations of the data, the fall in tax ratios in the other countries could not be considered significant, since they are only marginal.

In spite of the general increase in tax ratios in developing countries, however, the average level of taxation in these countries is still considerably less than that in developed countries. The average tax ratio in 16 of the developed countries in Europe and North America amounted to 26.2 per cent in 1969–71.8 Moreover, most of these countries raise more than 20 per cent of GNP in taxes (exclusive of social security contributions). The differences between the developed and less developed countries are greater if total taxes are defined to include social security contributions. The average ratio of taxes (on the latter basis) to GNP in the developed countries is about double that in the developed countries (34:16). A discussion of some possible reasons explaining these differences is contained in the previous study.9

evaluation of tax performance

The rationale and methodology for deriving indices of tax effort were explained in detail in the 1971 study.10 Briefly, while a simple comparison of tax ratios gives some indication of the relative levels of taxation in various countries, any inference on tax performance or effort based merely on such a comparison fails to take into account the fact that some countries are more favorably placed to levy taxes. That is, they can be said to have greater taxable capacity than others. The methodology employed consists essentially in identifying major economic factors that influence the capacity to levy and to pay taxes and in measuring their relative influences through regressions based on cross-section data. Given the coefficients of the explanatory variables chosen, a tax ratio can be “predicted” for each country, and this ratio may be taken to represent average use of capacity factors. An index of tax effort is derived by dividing the actual tax ratios by the calculated ratios.

It was hypothesized that the average level of income, the degree of openness of the economy, and the composition of GDP would each have a significant bearing on the taxable capacity of a country. These factors can be embodied in different measures in a regression equation, and more than one equation can be estimated by varying the combination of factors to see which combination would best serve our purpose. The results of five equations were reported by Chelliah.11 In this study, data for 1969–71 have been used to re-estimate all of them, and the results are given in Appendix II. In general, the estimated coefficients do not differ markedly from those obtained in the previous study, nor are there any significant changes in the overall goodness of fit of the equations. The mining share emerges again as an important determinant of tax ratios in developing countries in their present stage of development. This confirms a main plank in the earlier hypothesis and is to be expected in view of the strong seller's market in minerals. Besides, the relative stability of the coefficients indicates that the results obtained earlier were not largely fortuitous.

Equations (4) and (5), which include the share of agriculture in GDP in place of per capita income, display the best results in terms of goodness of fit. Equation (5)—which includes only the shares of mining and agriculture in GDP (besides the constant)—would seem to have the greatest statistical merit; moreover, the coefficient of per capita nonexport income (in equation (2)) is even less significant statistically than in the previous study.12 Nevertheless, as argued in the 1971 study, there are grounds for believing that the share of the agricultural sector affects not only taxable capacity but also, perhaps more importantly, the willingness to tax. Many developing countries have found it politically difficult to tax the agricultural sector. Moreover, per capita income has considerable normative significance in considering taxable capacity and in assessing tax effort. For these reasons, it was decided to adhere to the original decision of the Fiscal Affairs Department to calculate effort indices on the basis of equation (2), which incorporates per capita nonexport income, the percentage share of mining in GDP, and the percentage share of nonmineral exports in GNP as explanatory variables. A comparison of tax effort indices derived from equations (2) and (5) showed that the difference between alternative rankings of countries by the two sets of indices was not statistically significant.13

Table 1 reports the tax ratios and tax effort indices of the sample of 47 developing countries for the period 1969–71.14 Due caution must be exercised in interpreting these data, especially the tax effort indices. Besides the inevitable data problems, the computational procedures suffer from various limitations, especially in that taxable capacity may not have been adequately explained.15 Furthermore, it is not intended here to convey the idea that there is economic merit in a high level of taxation regardless of other circumstances and factors.

A comparison of the two rankings shown in Table 1, columns 2 and 5, indicates that, in general, countries with tax ratios that are above average (15.1 per cent) have tax effort indices that are above unity, and vice versa.16 Nonetheless, there are still considerable differences between the two rankings, especially among the countries with higher tax ratios. Thus, of the 12 countries with tax ratios greater than 19 per cent, only 617 are among the 12 countries with the highest tax effort indices. The high tax ratios exhibited by these countries may be attributed partly to above-average tax effort. In contrast, Iran, Jamaica, and Venezuela all have high tax ratios but tax effort indices less than 1. Furthermore, some countries with tax effort indices that are above unity are able to achieve only comparatively modest tax ratios. Among countries with tax ratios less than 10 per cent, all have tax effort indices below 0.710.

Table 1.Selected Developing Countries: Tax Ratios 1 and Indices of Tax Effort, 1966–68 and 1969–71
Taxes as Per Cent of GNPIndex of Tax Effort, 1969–71

Index of

Tax Effort,



2 (1)


Country 4

Country 4

Guyana23.420.6Egypt1.487Ivory Coast1.429
Brazil22.920.8Ivory Coast1.471Senegal1.382
Iran21.618.0Sri Lanka1.374Egypt1.343
Ivory Coast19.819.7China, Republic of1.304Sri Lanka1.270
Chile19.619.2Zaïre1.276Upper Volta1.183
Morocco17.816.5Ghana1.154China, Republic of1.116
China, Republic of17.813.1Zambia1.111Sudan1.098
Sri Lanka17.716.3India1.093Argentina1.098
Trinidad and Tobago17.715.2Kenya1.090Tanzania1.063
Ecuador13.412.9Costa Rica0.970Ecuador0.978
Costa Rica13.112.4Colombia0.901Burundi0.863
Thailand12.412.4Paraguay0.867Costa Rica0.813
Burundi11.410.4Trinidad and Tobago0.834Colombia0.803
Honduras11.310.5Upper Volta0.817Paraguay0.801
Upper Volta10.311.4Togo0.739Singapore0.752
Bolivia8.28.7Guatemala0.618Trinidad and Tobago0.701

As is well known, international comparisons of tax ratios are subject to several limitations. In particular, for several countries local government tax revenues were not included, or could not be included in full, and for a few countries figures for the gross domestic product have had to be used in the denominator. Where local tax revenues have not been covered, they are generally understood to be less than 10 per cent of the total. Nevertheless, in interpreting tax ratio figures, the extent of coverage indicated in Table 6, in Appendix I, should be kept in mind.

Ranked according to tax ratios for the period 1969–71.

As the tax ratios for 1966–68 for several countries are based on revised data, all the figures in this column are not the same as in Chelliah, op. cit., Table 6, column 8, pp. 278–79

Ranked according to index of tax effort, defined as the quotient of the actual tax ratio and the tax ratio estimated according to equation (2) for the period 1969–71 (the corresponding equation in Chelliah, op. cit., for the period 1966–68).

On the basis of the tax ratio of 12 per cent for the period 1972–73, Pakistan's present tax effort index is 1.028.

As is well known, international comparisons of tax ratios are subject to several limitations. In particular, for several countries local government tax revenues were not included, or could not be included in full, and for a few countries figures for the gross domestic product have had to be used in the denominator. Where local tax revenues have not been covered, they are generally understood to be less than 10 per cent of the total. Nevertheless, in interpreting tax ratio figures, the extent of coverage indicated in Table 6, in Appendix I, should be kept in mind.

Ranked according to tax ratios for the period 1969–71.

As the tax ratios for 1966–68 for several countries are based on revised data, all the figures in this column are not the same as in Chelliah, op. cit., Table 6, column 8, pp. 278–79

Ranked according to index of tax effort, defined as the quotient of the actual tax ratio and the tax ratio estimated according to equation (2) for the period 1969–71 (the corresponding equation in Chelliah, op. cit., for the period 1966–68).

On the basis of the tax ratio of 12 per cent for the period 1972–73, Pakistan's present tax effort index is 1.028.

It is of interest to inquire if the relative positions of different countries in the ranking by tax effort indices have changed between the periods 1966–68 and 1969–71, or, in other words, if the values of their indices of effort have changed materially. For this purpose, the effort indices based on 1969–71 data may be compared with those derived from 1966–68 data. Strictly speaking, because (as indicated earlier) GNP and tax data have been revised by several countries since the completion of the previous study, the indices for 1966–68 should have been recomputed on the basis of the revised data to ensure perfect comparability. However, the changes in the data are not judged to be such as to have any significant or even perceptible effect on the general results. Hence, a comparison is effected with the indices presented in the earlier study.18 But it must be pointed out that in respect of those countries for which the data revisions have been significant, comparisons between the indices for the two periods would be invalid. In particular, for Mexico, Mali, Tanzania, and Upper Volta, tax ratios for 1966–68 used in the earlier study are not comparable with those used for the period 1969–71.19

While it appears that countries that achieved strong tax performance (in terms of the effort index) in the earlier period continued to do so, and that those who had low tax effort indices in general continued to score low,20 the relative positions of a few countries changed dramatically. Sudan's tax effort index rose from 1.1 to 1.4, and the tax ratio from 13 per cent to 18.2 per cent. A large part of the increase in the ratio was found to be attributable to the increase in taxes on international trade. In particular, an import surcharge, introduced at 5 per cent in 1966, was raised progressively to reach 15 per cent in 1969.21 Again, both tax ratios and tax effort indices rose significantly for the Republic of China, Korea, and Malaysia. These countries have enjoyed high rates of economic growth in recent years, and presumably the built-in elasticity of the tax system as well as rate increases contributed to the increase in the ratios. Egypt has shown a moderate increase in the tax ratio as well as in the index of effort, whereas Tunisia has considerably improved its relative position in tax effort with only a moderate increase in the tax ratio. This seems puzzling at first but is explainable in terms of the increase in the significance of the mining sector as an explanatory variable in the estimating equation fitted to the more recent data. Thus, although countries with large mining sectors have higher tax ratios, Brazil and Tunisia, lacking such a tax handle, score higher in terms of effort. And, for the same reason applied in reverse, Iran has a lower effort index than for the period 1966–68. The same may be said of Zaïre, whose tax ratio rose considerably.

In conclusion, the tax effort indices are not intended to be applied in a mechanistic fashion but rather to be considered useful additional information in judging the scope for more taxes. As argued in the previous study, the existing level of taxation, the buoyancy of the tax system in the recent period, and several other relevant factors—such as the content of increases in public expenditure—should also be taken into account in an overall assessment of the tax situation in a given country.

III. Composition of Revenues

Table 2 gives the ratio of major categories of taxes to total taxes (excluding social security contributions) in the 47 countries for the period 1969–71. This presentation enables us to focus attention on differences in the patterns of taxation between different countries, irrespective of the levels of total taxation.

Table 2.Selected Developing Countries: Composition of Tax Revenue, 1969–71(In per cent of total)
Income Taxes 1 (1)Property Taxes

Poll and Personal Taxes

Total Direct Taxes (Cols. 1+2+3)Taxes on International Trade

Import Taxes (4a)Export and Other Taxes (4b)Taxes on Production and Internal Transactions

Total Indirect Taxes (Cols. 4+5)Other Taxes

China, Republic of9.514.524.
Costa Rica20.81.722.532.827.94.942.174.92.6
Ivory Coast15.43.719.156.837.819.
Sri Lanka18.74.323.046.816.030.830.277.0
Trinidad and Tobago56.36.863.119.819.817.136.9
Upper Volta13.92.412.428.753.949.

Including royalties on minerals

Includes land tax.

Including royalties on minerals

Includes land tax.

As would be expected, the composition of taxes in the period 1969–71 is similar to that for 1966–68. The simple arithmetic means of the percentage shares for the sample as a whole indicate that taxes on international trade constitute the largest share of total taxes, followed closely by taxes on production and internal transactions and then by income taxes. For direct taxes there was a further shift, following that evidenced between the periods 1953–55 and 1966–68, from property and poll taxes to income taxes; the latter increased from 23.5 per cent in 1966–68 to 27.3 per cent in 1969–71. The increase in income taxes was also partly at the expense of indirect taxes, which declined from 65.8 per cent in the period 1966–68 to 63.9 per cent in 1969–71. Within the category of indirect taxes, the relative importance of both taxes on international trade and taxes on production and internal transactions declined. While the latter was not in line with the increasing trend in these taxes between 1953–55 and 1966–68, the decline was only marginal and not significant enough to constitute a change in the pattern of taxation.22

As arithmetic averages are likely to be misleading where the patterns of change between countries are markedly divergent, it is necessary to know the percentage of countries in which the shift from indirect to direct taxes has taken place. This change was found to have occurred in about 52 per cent of the countries covered.

Table 3 gives the ratio of major categories of taxes as well as total taxes (including social security) to GNP in the 47 countries, which are organized according to rising per capita GNP in U.S. dollars. This gives an idea of the levels of various forms of taxation in relation to GNP in the selected countries. In general, the pattern of taxation is similar to that for the period 1966–68. First, property taxes are of little importance; they constitute less than 1 per cent of GNP in the majority of the countries. Second, income taxes are not insignificant even in less developed countries. In about two thirds of the countries covered in the study, these taxes bring in more than 2 per cent of GNP, and more than one fourth of the countries raise more than 5 per cent of GNP in income taxes (including royalties on minerals). In 10 of the 28 countries for which a breakdown between personal and corporate income taxes is available, personal income tax amounts to 2 per cent or more of GNP. Third, the average ratios of taxes on international trade and on production and internal transactions to GNP are not much different between the richer half and the poorer half of the sample. The difference in the overall tax ratio between countries in the upper and the lower half of the income scale arises primarily from the differences in the proportion of GNP that the two groups raise through the income tax.

Table 3.Selected Developing Countries: Major Categories of Taxes, 1969–71 1(In per cent of total)
Per Capita GNP(U.S. dollars)(1)
Per Capita GNP(U.S. dollars)

Income taxes 2

Of which, personal income tax

Property taxes

Poll and personal taxes

Taxes on international trade

Taxes on production and internal transactions


Social security contributions

Total taxes, including social security

1. Burundi532.
2. Mali541.
3. Rwanda551.
4. UpperVolta571.
5. Ethiopia712.
6. Indonesia784.
7. Nepal790.
8. Zaïre897.42.30.419.42.10.08
9. India902.
10. Tanzania963.
11. Sudan1121.80.630.
12. Pakistan1231.
13. Kenya1355.
14. Togo1402.
15. Sri Lanka1663.
16. Thailand1891.
17. Senegal1943.
18. Philippines1972.
19. Egypt1994.
20. Bolivia2021.
21. Ghana2233.
22. Morocco2264.
23. Paraguay2461.
24. Korea2605.23.5
25. Honduras2683.
26. Tunisia2696.
27. Ecuador2801.
28. Colombia3264.
29. Guyana3378.
30. Ivory Coast3373.00.711.34.00.76
31. Guatemala3541.
32. Malaysia3545.
33. Turkey3555.
34. China, Republic of3651.
35. Zambia37518.
36. Iran37615.
37. Brazil4093.
38. Peru4394.
39. Costa Rica5352.
40. Lebanon5661.
41. Jamaica6668.
42. Mexico6753.
43. Trinidad and Tobago7879.
44. Chile9206.
45. Singapore9644.
46. Venezuela99117.
47. Argentina1,0384.2517.6

Rows may not sum to total owing to rounding errors.

Including royalties on minerals.

a For 1970-71 only.

Includes land tax.

Rows may not sum to total owing to rounding errors.

Including royalties on minerals.

a For 1970-71 only.

Includes land tax.

Top 23


in the

Per Capita

Income Scale
Bottom 24


in the

Per Capita

Income Scale
(In per cent)
Average ratio of income taxes to GNP6.72.8
Average ratio of international trade taxes to GNP4.15.4
Average ratio of production taxes to GNP5.04.7
Average tax ratio16.813.5

In this connection it is important to note that mineral production 23 has a favorable impact on income taxes, and hence on overall tax ratios. A number of countries in the top 50 per cent of the sample that are noted for the large share of mining in GDP are also leading users of the income tax, including Chile, Guyana, Iran, Trinidad and Tobago, Venezuela, and Zambia.

regional variations in tax levels and composition

While it is beyond the scope of the present study to make a detailed comparison of the tax structures of countries within different regions, Tables 4 and 5 have been prepared to give some idea of the regional variations among the 47 countries included in the study.24

Table 4.Selected Developing Countries: Regional Variations in the Levels of Taxation, 1969–711(In per cent of GNP)
Income Taxes 2

Property Taxes

Poll and Personal Taxes

Total Direct Taxes (Cols.1+2+3)

Taxes on Inter-national Trade

Taxes on Production and Internal Transactions

Total Indirect Taxes (Cols.5+6)

Total Taxes3

Middle East and North Africa5.
Tropical Africa4.
South America5.
Central America and the Caribbean5.
Asia and the Far East3.
Average for the sample4.

Calculations based on Table 3.

Including royalties on minerals.

Excluding social security contributions.

Calculations based on Table 3.

Including royalties on minerals.

Excluding social security contributions.

Table 5.Selected Developing Countries: Regional Averages of Major Categories of Taxes, 1969–711
Income Taxes 2 (1)Property Taxes (2)Poll and Personal Taxes (3)Taxes on International Trade (4)Of which import taxes (4a)Taxes on Production and Internal Transactions (5)Ranking by
Total TaxIncome Tax ShareInternational Trade Taxes ShareProduction Taxes Share
In per cent of total
Middle East and North Africa29.
Tropical Africa24.02.44.943.328.622.42415
South America29.34.72.6522.036.13352
Central America and the Caribbean36.24.426.523.431.84144
Asia and the Far East22.68.528.821.738.25521
Average for the sample27.35.01.432.224.431.9
Source: Based on Table 2.

Rows may not add to 100 per cent owing to rounding errors.

Including royalties on minerals.

Source: Based on Table 2.

Rows may not add to 100 per cent owing to rounding errors.

Including royalties on minerals.

Average tax ratios range from 17.9 per cent for countries in the Middle East and North Africa to 12.9 per cent for those in Asia and the Far East. Of the 11 countries that are included in the latter group, only 4 are in the lower one fourth of countries on the per capita income scale. Again, countries in Central America and the Caribbean rank fourth in terms of tax ratio, but all countries in this group are in the upper half of the per capita income scale.

The relative importance of major taxes in different regions is brought out in Table 5, which shows the percentages of major taxes to total taxes. Countries in the Middle East and North Africa have the largest average overall tax ratio and also have higher-than-average income taxes and taxes on production. Tropical Africa is the most dependent on international trade taxes. Asia and the Far East have the lowest average total tax ratio and also the lowest ratio of income taxes. The percentage variation between regions is least for import taxes.


I. Statistics

Table 6.Selected Developing Countries: Years And Levels of Government


China, Republic of1969–71AParaguay1969–71C
Costa Rica1969–71APhilippines1969–71C
Ghana1969–70CSri Lanka1969–71C
Indonesia1969–71cTrinidad and Tobago1969–71C
Ivory Coast1969–71cTurkey1969–71A
Jamaica1969–71cUpper Volta1968–70A
A = all levels.C = central government (plus state governments in federal countries); in a few countries, it also includes collections on behalf of local governments.
Table 7.Selected Developing Countries: Indices of Tax Effort Based on Equation (5), 1969–71
CountryIndex of

Tax Effort
CountryIndex of

Tax Effort
Tunisia1.481Costa Rica0.951
Ivory Coast1.476Iran0.925
Sri Lanka1.323Argentina0.879
Ghana1.285Upper Volta0.843
China, Republic of1.225Trinidad and Tobago0.831

II. Taxable Capacity Equations


T/Y = tax ratio (excluding social security contributions)

Yp = per capita GNP in U.S. dollars

F/Y= the ratio of imports plus exports to GNP

YpXp = per capita nonexport income in U.S. dollars

Ny = the share of mining in GDP

Ay = the share of agriculture in GDP

Xy = the export ratio

Xyt = the export ratio excluding mineral exports

Regression equations relating to the tax ratios for 47 developing countries, 1969–71

The Lotz-Morss Equation

(All ratios/shares in per cent)

Note: Figures in parentheses are t-ratios. With 47 observations, at the 0.95 confidence level, the critical value of the t-ratio is 1.68 (assuming a one-tail distribution).

Mr. Chelliah, Chief of the Fiscal Analysis Division of the Fiscal Affairs Department, is a graduate of Madras University and of the University of Pittsburgh. He was formerly Professor of Economics at the University of Rajasthan and at the Osmania University, Hyderabad. He served as Consultant to the UN Economic Commission for Asia and the Far East, in Bangkok, and for some time was its Regional Fiscal Advisor. He is the author of Fiscal Policy in Underdeveloped Countries and a number of articles in economic journals.

Mr. Baas, economist in the Fiscal Affairs Department when this paper was prepared and presently in the European Department, studied and taught at the University of Auckland, New Zealand, before joining the Fund.

Ms. Kelly, economist in the Fiscal Analysis Division of the Fiscal Affairs Department, is a graduate of the University of New England (Australia) and Australian National University. She is currently on leave from the Reserve Bank of Australia.

Raja J. Chelliah, “Trends in Taxation in Developing Countries,” Staff Papers, Vol. 18 (July 1971), pp. 254–331.

Only 49 countries were included in the regressions in the previous study.

All these countries formed part of the sample of the earlier study.

Data for 1971 were not available for all countries. Table 6, in Appendix I, indicates the years covered as well as the levels of government included for each country.

In line with the previous study, the gross national product (GNP) was used as the income measure in the denominator except for Mali, Nepal, Senegal, and Upper Volta, for which only gross domestic product (GDP) data were available.

Data on exports, imports, and the shares of different production sectors in GDP for 1966–68, however, were not revised.

Except for Argentina, all countries covered in the present study have a per capita income below US$1,000. (See Table 3.) Given the wide coverage, the sample may be said to include most low-income countries.

See Organization for Economic Cooperation and Development, Revenue Statistics of OECD Member Countries, 1965–1971 (Paris, 1973).

Chelliah, op. cit., pp. 280–81.

Ibid., pp. 291–96.

Ibid., pp. 315–16.

Using the data for the period 1966–68, it was found to be significant at the 0.22 level.

The rank correlation coefficient was 0.96. As explained in the previous study, rankings of countries are not so important as the values of the tax effort indices. The effort indices computed using equation (5) are given in Table 7, in Appendix I.

For purposes of comparison, tax effort indices for these countries for the period 1966–68 are reproduced from the 1971 study (Chelliah, op. cit., Table 9, pp. 302–303).

For a detailed discussion of limitations, see Chelliah, op. cit., pp. 298–300.

Of the 21 countries that have tax ratios above 15.1 per cent, 17 are among the 22 countries that have tax effort indices greater than unity.

Brazil, Egypt, Ivory Coast, Malaysia, Tunisia, and Zaïre.

These are reproduced in Table 1, columns 6 and 7.

For Mexico, tax data for the latter period covers only the Central Government, whereas those for the earlier period were meant to cover local governments as well. It is understood that the Mexican authorities were not satisfied with tax data for general government reported earlier and are in the process of revising them; meanwhile, official data are available only for the Central Government. However, if comparable, nonauthoritative figures for the general government were used for 1969–71, the tax ratio would be 11.02 per cent and the tax effort index would be 0.76. For Upper Volta, figures for only two years were used in the previous study; and for Mali and Tanzania, GDP figures have been revised substantially for the earlier period.

The correlation between the rankings according to the effort indices for the two periods is 0.88. Of the 47 countries compared, 30 remained in the same quartiles as before, 9 moved up, and 8 moved down (mostly to the next quartile).

The rise in the ratio is explained by the fact that whereas tax revenue increased at 21 per cent per annum between 1969 and 1970, GDP at current prices is estimated to have increased by only 4.5 per cent a year.

As in the previous study, excise and sales tax figures include excises and sales taxes on imports, as they could not be separated out. In some countries, such as Chad, Mali, and Senegal, turnover taxes on imports bring a substantial part of revenue from sales taxes. Thus, taxes on internal transactions should not be thought to apply only to domestically produced goods.

Royalties on minerals, it may be recalled, are treated like income taxes.

See Chelliah, op. cit., p. 313, for details of the five regional groupings.

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