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The quality of tax administration and firm performance: evidence from developing countries

Era Dabla-Norris (), Florian Misch, Duncan Cleary () and Munawer Khwaja ()
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Era Dabla-Norris: International Monetary Fund
Duncan Cleary: Revenue Irish Tax and Customs

International Tax and Public Finance, 2020, vol. 27, issue 3, No 3, 514-551

Abstract: Abstract 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.

Keywords: Tax administration; Firm performance; Firm productivity (search for similar items in EconPapers)
JEL-codes: E62 H20 H30 H83 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10797-019-09551-y

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