Reforming Tax Systems: The Interplay of Governance, Informality, and Institutional Strength in Developing Countries

João Tovar Jalles

Review of Development Economics, 2026, vol. 30, issue 1, 211-225

Abstract: This paper analyzes the political and institutional determinants of tax reform implementation in 45 emerging market and low‐income countries from 2000 to 2015. Drawing on a narrative database of structural tax reforms and employing binary logit models, we assess how ideology, corruption, informality, and government effectiveness influence reform likelihood. Our findings show that left‐wing governments are significantly less likely to pursue tax reforms, especially in revenue administration and indirect taxes. However, high levels of perceived corruption and informality are strong positive predictors of reform, suggesting fiscal and legitimacy pressures drive policy change in challenging contexts. In contrast, government effectiveness does not significantly affect reform probability. These results are robust across alternative estimators and tax categories. The analysis highlights the importance of political context, not just institutional capacity, in shaping tax reform outcomes. Policy strategies must be tailored to political constraints and leverage moments of urgency to maximize reform success.

Date: 2026
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