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Corruption, Taxes and Compliance

Explore the correlation between corruption, tax revenue, and compliance institutions. Learn how combating corruption improves tax compliance and revenue outcomes. An informative study by Anja Baum, Sanjeev Gupta, Elijah Kimani, and Jules Sampawende Tapsoba from the International Monetary Fund, October 10, 2017.

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Corruption, Taxes and Compliance

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  1. Corruption, Taxes and Compliance Anja Baum, Sanjeev Gupta, Elijah Kimani, and Jules Sampawende Tapsoba International Monetary Fund October 10, 2017

  2. Outline • Section 1. Stylized Facts • Section 2. The Impact of Corruption on Tax Revenue • Section 3. Improving Compliance – The Impact of Institutions • Section 4. Results

  3. Stylized Facts

  4. Stylized Facts

  5. Stylized Facts

  6. Outline • Section 1. Stylized Facts • Section 2. The Impact of Corruption on Tax Revenue • Section 3. Improving Compliance – The Impact of Institutions • Section 4. Results

  7. The Impact of Corruption on Tax Revenue

  8. The Impact of Corruption on Tax Revenue

  9. The Impact of Corruption on Tax Revenue • o Notes: Robust standard errors in parentheses, *** significance at the 1 percent level, ** significance at the 5 percent level, * significance at the 10 percent level.

  10. Outline • Section 1. Stylized Facts • Section 2. The Impact of Corruption on Tax Revenue • Section 3. Improving Compliance – The Impact of Institutions • Section 4. Results

  11. Improving Compliance – The Impact of Institutions

  12. Methodology: Propensity Score Matching • Treatment against non-treatment group • Matches countries with similar propensity scores (probit model) • Advantage: solves the endogeneity issue  finds observations across countries when they were equally likely to establish the respective institution, by means of propensity scores, and compares results of these countries

  13. Improving Compliance – The Impact of Institutions

  14. Improving Compliance – The Impact of Institutions

  15. Outline • Section 1. Stylized Facts • Section 2. The Impact of Corruption on Tax Revenue • Section 3. Improving Compliance – The Impact of Institutions • Section 4. Results

  16. Improving Compliance – The Impact of Institutions • Results confirm negative impact of corruption on most tax components • Strong impact of LTOs on both tax revenue and corruption • Revenue tends to increase faster after establishment • Corruption tends to decline more • The effect of MTOs and ACAs on corruption and revenue performance is not statistically significant • Addressing compliance could improve both tax revenue and the perception of corruption

  17. Thank you!

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