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Tax Administration and Firm Performance: New Data and Evidence for Emerging Market and Developing Economies
Author: Ms. Era Dabla-Norris, Florian Misch, Mr. Duncan Cleary, and Munawer Khwaja
Series:
IMF Working Papers
Volume/Issue:
Volume 2017: Issue 095
Language:
English
Publication Date:
14 Apr 2017
DOI:
https://doi.org/10.5089/9781475595147.001
ISBN:
9781475595147
ISSN:
1018-5941
Pages:
40
Keywords:
WP; tax administration; compliance cost; firm performance; total factor productivity; omitted firm category; small business; firm productivity; cash flow; enterprise manager; micro enterprise; compliance burden; Tax administration core functions; Compliance costs; Tax return filing compliance; Labor productivity; Tax Administration Diagnostic and Assessment Tool (TADAT); Central and Eastern Europe; Central Asia; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Tax compliance costs tend to be disproportionately higher for small and young businesses. This paper examines how the quality of tax administration affects firm performance for a large sample of firms in emerging market and developing economies. We construct a novel, internationally comparable, and multidimensional index of tax administration quality (the TAQI) using information from the Tax Administration Diagnostic Assessment Tool. We show that better tax administration attenuates the productivity gap of small and young firms relative to larger and older firms, a result that is robust to controlling for other aspects of tax policy and of economic governance, alternative definitions of small and young firms, and measures of the quality of tax administration. From a policy perspective, we provide evidence that countries can reap growth and productivity dividends from improvements in tax administration that lower compliance costs faced by firms.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund