Analysis of Tax Performance in East Asia with Special Emphasis on the Lao PDR, 1996-2014

  • Ka Phaydanglobriayao Department of Economics, Faculty of Economics and Business Management, National University of Laos, Dongdok Campus, Xaythany District-7322, Vientiane Capital, Lao PDR
Keywords: Tax collection, Tax performance, Tax capacity, Tax effort index.


Sufficient tax collection seems less problematic in developed countries, whereas it is a hot topic in developing countries around the world because many developing countries have faced a number of constraints affecting their tax performance. This study explores determinants of tax-to-GDP ratio, which is an important indicator of tax performance in East Asia where rapid economic growth presents; meanwhile previous studies on tax performance are scant, in particular for developing countries in the region. In addition, this study utilizes the empirical results to construct tax effort index so as to shed light on tax capacity of the Lao PDR. The results indicate that per capita GDP and trade liberalization are statistically and positively correlated with tax-to-GDP ratio, whereas manufacturing share and age dependence rate are statistically negative effects on the ratio. This is surprising that economic structure variable (e.g., manufacturing share of GDP) turns to be statistically negative; this could mean that tax incentive policy resulted in unsuccessful outcome over the period. Moreover, tax effort index shows that it is less than unity, meaning that tax capacity of the country remains low and this has caused low level of tax collection in the country over the period.  


[1] A. S. Gupta. “Determinants of tax revenue efforts in developing countries.” Internet: sol3/papers2.cfm?abstract_id=1007933, Aug. 23, 2007 [Feb. 10, 2017].
[2] D. Greenaway, W. Morgan, & P. Wright. (2002). “Trade liberalization and growth in developing countries.” Journal of Development Economics, 67, pp. 229-244.
[3] L. Chen. “The market driven trade liberalization and East Asian regional integration.” Internet: http://, Mar. 20, 2016 [Feb. 13, 2017].
[4] L. Bernardi, L. Fumagalli, & L. Gandullia. “Overview of the tax systems and main tax policy issues,” in Tax systems and tax reforms in South and East Asia, 1st ed. L. Bernadi, A. Fraschini, & P. Shome, Ed. Arbingdon: Routledge, 2006, pp. 3-34.
[5] P. S. Heller. (1975). “A model of public fiscal behavior in developing countries: Aid, investment, and taxation.” American Economic Review, 65(3), pp. 429-445.
[6] M. S. Gaalya. (2015). “Trade liberalization and tax performance in Uganda.” Modern Economy, 6, pp. 228-244.
[7] I. Xaynavong & C. Czerkawski. “Does trade liberalization reduce trade tax revenue in Laos.” Internet:, Jun. 3, 2015 [Feb. 15, 2017].
[8] T. A. Zimmermann. “Trade liberalization in South-East Asia.” Internet: publikationen/tlasia.pdf, Jan. 15, 2016 [Feb. 15, 2017].
[9] J. M. Teera & J. Hudson. (2004). “Tax performance: A comparative study.” Journal of International Development, 16, pp. 785-802.
[10] L. P. Ebrill, J. G. Stotski, & R. Gropp. (1999, Jul.). “Revenue implications of trade liberalization.” Occasional Paper No. 180, IMF. [Online]. pp. 1-42. Available: 180/ index.htm
[11] L.-A. Kanokpan. (2002, Nov.). “How can Cambodia, Lao PDR, Myanmar, and Viet Nam cope with revenue lost due to AFTA tariff reduction.” Working Paper No. 29, ADB. [Online]. pp. 1-23. Available: [Feb 15, 2017].
[12] B. Khatty & J. M. Rao. (2002). “Fiscal faux? Analysis of the revenue implications of trade liberalization.” World Development, 30(8), pp. 1431-1444.
[13] J. L. Tongzon & H. Khan. (2005). “The challenge of economic integration for transitional economies of Southeast Asia: Coping with revenue losses.” ASEAN Economic Bulletin, 22(3), pp. 266-283.
[14] T. Agbeyegbe, J. G. Stotsky, & A. WoldeMariam. (2006). “Trade liberalization, exchange rate changes, and tax revenue in Sub-Saharan Africa.” Journal of Public Economics, 1(3), pp. 323-338.
[15] S. Oraboune. “Lao PDR and its Development Partners in East Asia (China and Japan),” in Japan and Korea with the Mekong River Basin Countries. M. Kagami, Ed. Bangkok: IDE-JETRO, 2011, pp. 164-205.
[16] K. Souriya, S. Sainasinh, & P. Onphandala. (2014). Public spending, aid effectiveness, and poverty reduction in Lao PDR.” Journal of International Cooperation Studies, 21(3), pp. 163-186.
[17] IMF. “Lao People’s Democratic Republic: Staff report for the 2014 article IV consultation-debt sustainability analysis.” Internet:, Feb. 26, 2015 [Feb. 16, 2017].
[18] IMF. “Lao People’s Democratic Republic: 2009 article IV consultation-staff report; staff supplement; public information notice on the executive board discussion.” Internet: pubs/cat/longres.aspx?sk=23276.0, Sept. 11, 2009 [Feb. 16, 2017].
[19] ADB. “Asian development outlook 2014: Fiscal policy for inclusive growth.” Internet: /sites/default/files/publication/31241/ado-2014_1.pdf, Jan. 1, 2014 [Feb. 16, 2017].
[20] J. Martinez-Vazquez. “Taxation in Asia.” Internet: 28890/taxation-asia.pdf, Jun. 15, 2011 [Feb. 16, 2017].
[21] World Bank. “Global economic prospects: Having fiscal space and using it.” Internet: https://, Jan. 13, 2015 [Feb. 16, 2017].
[22] B. Vannalat, P. Kyophilavong, A. Phonvixay, & B. Sengsoulivong. (2015). “Assessment the effect of trade agreement on export of Lao PDR.” International Journal of Economics and Finance, 5(2), pp. 365-376.
[23] S. Suvannaphakdy, C. Czerkawski, & T. Toyoda. (2013). “Potential impacts of regional enlargement in East Asia on Laos.” Journal of Economic Development, 38(3), pp. 85-110.
[24] P.-C. Athukolrala & J. Mennon. “Global production sharing and trade patterns, and determinants of trade flows in East Asia.” Internet:, Jan. 1, 2010 [Feb. 10, 2017].
[25] W. Thorbecke & N. Salike. “Foreign direct investment in East Asia.” Internet: jp/publications/pdp/13p003.pdf, Mar. 15, 2013 [Feb. 16, 2017].
[26] R. Rowthorn & R. Ramaswamy. “Deindustrialization-Its causes and implications.” Internet: https://, Sept. 29, 1997 [Feb. 16, 2017].
[27] R. Bird, J. Martinez-Vazquez, & B. Torgler. (2008). “Tax effort in developing countries and high income countries: The impacts of corruption, voice, and accountability.” Economic Analysis & Policy, 38(1), pp: 55-71.
[28] F. Haque. “Governance and growth: Case study of selected countries in South East Asia,” Internet: 20of%20Selected%20Countries%20in%20South%20East%20Asia.pdf, Nov, 28, 2012 [Feb. 16, 2017].
[29] UNCTAD. “World Investment Report 2014, investing in the SDGs: An action plan.” Internet:, Apr. 30, 2014 [Feb. 16, 2017].
[30] ADB. “Asia-Pacific aspirations: Perspectives for a post-2015 development agenda.” Internet: http://, Dec. 23, 2013 [Feb. 16, 2017].
[31] UNESCAP. “Statistical Yearbook for Asia and the Pacific 2014.” Internet: default/files/ESCAP-SYB2014.pdf, Dec. 1, 2014 [Feb. 16, 2017].
[32] K. Phaydanglobriayao. “Analysis of Buoyancy and Elasticity of the Tax Systems in the Lao PDR.” PhD dissertation, Kobe University, Japan, 2016.
[33] J. H. Leuthold. (1991). “Tax shares in developing countries: A panel study.” Journal of Development Economics, 35, pp. 173-185.
[34] C. S. Adam, D. L. Bevan, & G. Chambas. (2001). “Exchange rate regimes and revenue performance in Sub-Saharan Africa.” Journal of Development Economics, 64, pp. 173-213.
[35] J. G. Stotsky & A. WoldeMariam. “Tax effort in Sub-Saharan Africa.” Internet: external/pubs/ft/wp/wp97107.pdf, Sept 1, 1997 [Feb. 16, 2017].
[36] D. Ghura. “Tax revenue in Sub-Saharan Africa: Effects of economic policies and corruption.” Internet:, Sept. 1, 1998 [Feb. 16, 2017].
[37] M. Piancastelli. (2001). “Measuring the tax effort of developed and developing countries: Cross country panel data analysis, 1985/95.” Internet:, Sept 23, 2001 [Feb, 17, 2017].
[38] S. Mahdavi. (2008). “The level and composition of tax revenue in developing countries: Evidence from unbalanced panel data.” International Review of Economics and Finance, 17, pp. 607-617.