On the Political Economy Determinants of Tax Reforms: Evidence from Developing Countries

Sanjeev Gupta and Joao Jalles

No 2020/0151, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: This paper analyzes the role of political variables in the implementation of structural tax reforms in 45 emerging market and low-income economies during 2000-2015. The existing literature identifies several hypotheses that drive reforms, but empirical studies that support these hypotheses are lacking. Relying on a new database of structural tax reforms and on binary-type models, our results suggest that a left-wing government is less inclined to implement tax reforms while both proximity to elections and political strength orcohesion are positively associated with tax reforms. The influence of the left government is stronger in low-income than in emerging market economies and revenue administration reforms are resisted the most by such governments. Proximity to elections seems to trigger reforms of personal income tax (PIT) but opposite holds for trade tax reforms. Political cohesion is a necessary ingredient to reform most tax categories and revenue administration.

Keywords: fiscal policy; binary choice models; tax reforms; elections; political fragmentation; ideology (search for similar items in EconPapers)
JEL-codes: C33 C36 D63 E32 E62 H20 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: On the Political Economy Determinants of Tax Reforms: Evidence from Developing Countries (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp01512020

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