Tax shares in developing economies A panel study

Tax shares, the ratio of tax receipts to GNP or GDP, vary across countries for a number of reasons: stage of development, availability of appropriate tax handles, sources of non-tax income, and differences in tastes for public goods. In this study, a model is developed to explain differences in tax shares for a set of eight African countries. The model is estimated using a panel of data covering the time period 1973–1981. A measure of tax effort for each of the countries is obtained by applying the estimated coefficients to the variables of the country and comparing the actual tax share to the predicted tax share. Further insight is gained into differences in tax shares and tax effort by application of the model to the direct and indirect tax shares of the countries.