Political Institutions, State Building, and Tax Capacity: Crossing the Tipping Point

Vitor Gaspar, Laura Jaramillo and Philippe Wingender

No 2016/233, IMF Working Papers from International Monetary Fund

Abstract: An empirical finding by Gaspar, Jaramillo and Wingender (2016) shows that once countries cross a tax-to-GDP threshold of around 12¾ percent, real GDP per capita increases sharply and in a sustained manner over the following decade. In this paper, we attempt via four case studies—Spain, China, Colombia, and Nigeria—to illustrate that the improvements in tax capacity have been part of a deeper process of state capacity building. We discuss the political conditions that supported tax capacity building, highlighting three important political ingredients: constitutive institutions, inclusive politics and credible leadership.

Keywords: WP; tax capacity; income tax; Lagos State government; real GDP; tax reform; tax threshold; income per capita; taxation; development; institutions; political economy; government activity; UDC government; State revenue staff; progressive tax; Subnational tax; Tax administration core functions; Tax return filing compliance; Global (search for similar items in EconPapers)
Pages: 33
Date: 2016-12-02
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Citations: View citations in EconPapers (3)

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