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

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...

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Bibliographic Details
Published in:International tax and public finance 2020-06, Vol.27 (3), p.514-551
Main Authors: Dabla-Norris, Era, Misch, Florian, Cleary, Duncan, Khwaja, Munawer
Format: Article
Language:English
Subjects:
Business Taxation/Tax Law
Companies
Compliance
Corporate taxes
Developing countries
Economics
Economics and Finance
Emerging markets
Governance
LDCs
Management
Organizational performance
Productivity
Public Finance
Startups
Tax administration
Taxation
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Summary: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.
ISSN:0927-5940
1573-6970
DOI:10.1007/s10797-019-09551-y