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.

Abstract

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.  

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Published
2017-03-07
Section
Articles