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No public policy issue is of more importance than the structure and level of taxes. Most recently, proposals (supported by the IMF) to increase middle class taxes in Bolivia almost toppled the government. Plans to extend the V.A.T. or increase its rates have been a source of political agitation in Ecuador and Mexico. Despite the impact of tax policy on economic growth and political stability, there is no comprehensive body of work addressing the economic effects of tax policy in developing countries.  |
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| IPD Book Series: Taxation in Developing Countries: Six Case Studies and Policy Implications |
| Publication: Edited by by Roger Gordon |
This volume provides a detailed assessment of the current tax structure in six developing countries: Argentina, Brazil, India, Kenya, Korea, and Russia. Each of the six case studies lays out the current statutory provisions, how they have evolved over time, the resulting changes in tax revenue, and the key fiscal pressures faced currently looking forward. The volume includes in addition two overview papers that reassess the conventional wisdom about the appropriate design of tax policy in developing countries.
The tax systems in these countries are strikingly at odds with the conventional wisdom in the public finance literature. These countries make little use of personal income taxes. Their value-added taxes have effective tax rates that vary dramatically by good, due to a combination of exempt goods and evasion. They also make substantial use of tariffs and corporate income taxes, distorting trade patterns in goods and capital.
Why are the choices so different from those in developed countries? The key explanation seems to be the greater difficulties they face in tax administration and enforcement. The informal economy is large, while firms in the formal economy can easily understate their tax base. The resulting large variation in effective vs. statutory tax rates raises serious questions about the analysis of tax reforms on the economy. What matters for economic activity are effective tax rates. How these vary as statutory tax rates change may not be at all clear, raising serious challenges in forecasting the effects of possible tax reforms on economic activity or on government tax revenue. |
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| Tax Task Force Meeting 2005 |
| Event: Mar 30, 2005 - Mar 30, 2005 |
| Our second meeting held at Columbia University in March 2005, provided a forum for tax practitioners from Brazil, Argentina, India, Korea, Peru, Pakistan, Ecuador, and Poland to discuss tax reform with top academics. Task force members presented a model for examining the impact of reforms undertaken by developing countries, and explored the ways this model could be used to better understand tax policy in each country. The task force is currently in the process of commissioning papers to be written jointly by academics and practitioners. |
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| Tax Task Force Meeting 2004 |
| Event: Dec 02, 2004 - Dec 02, 2004 |
| In November 2004, the Tax Task Force convened for the first time with the support of the UNDP. At the meeting, expert practitioners and academics explored why tax policy in developing countries varies so greatly from policies in wealthy countries and from theoretical predictions. Participants compared the experiences of Brazil, Pakistan, and India. These case studies led to discussions on how information technology, tax administration, and corruption affect tax policy. The task force outlined a list of other countries to review and a plan for augmenting existing literature on tax policy and administration in the developing world. The next meeting, scheduled for March 2005 in Cancun, Mexico, will bring together tax specialists from a range of emerging market countries. |
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