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Tax Systems and Development

Author

Listed:
  • Mohammed Mardan
Abstract
This paper analyzes the optimal tax system consisting of the tax rate and the capacity of the tax administration. I challenge the conventional wisdom that tax rates and tax administrations’ capacity are complements showing that their relationship depends on a country’s level of development. Accordingly, developed and developing countries should set higher tax rates and administrative capacities than moderately developed countries. The discrepancy compared to observed practices regarding administrative capacities can be resolved by an aspect previously disregarded in the tax systems literature: the degree of tax administrations’ autonomy. With autonomous tax administrations, capacity increases monotonically with development as suggested by the empirical literature. Finally, I analyze how fighting tax havens affects non-haven countries’ tax revenues. While developed countries benefit, the same applies to developing countries only if tax administrators and lawmakers tightly coordinate their actions.

Suggested Citation

  • Mohammed Mardan, 2019. "Tax Systems and Development," CESifo Working Paper Series 7940, CESifo.
  • Handle: RePEc:ces:ceswps:_7940
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp7940_0.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    developing countries; profit shifting; tax administration; tax competition; tax haven;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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