Tax Potential vs. Tax Effort: A Cross-Country Analysis of Armenia's Stubbornly Low Tax Collection

David Grigorian and Hamid Davoodi

No 2007/106, IMF Working Papers from International Monetary Fund

Abstract: Despite recording double digit growth since 2000, Armenia's tax-to-GDP ratio has been fairly stable at about 14½ percent. This paper catalogues a range of factors that may account for Armenia's stubbornly for tax collection by benchmarking Armenia's tax-to-GDP against some comparator countries and conducting an extensive econometric study of the main determinants of tax collection. We find empirical support for the hypothesis that the persistence of Armenia's low tax-GDP ratio can be traced to persistence of weak institutions and a large shadow economy. The gap between the potential and actual tax collection in Armenia could be as high as 6½ percent of GDP. We conclude with some policy recommendations that, if adopted, can boost revenue buoyancy.

Keywords: WP; Armenia; tax revenue; tax potential; tax collection; institutions; shadow economy; tax-to-GDP ratio; CIS country; tax effort; revenue buoyancy; VAT collection; tax performance; tax morale; small share; Income and capital gains taxes; Tax administration core functions; Informal economy; Middle East and Central Asia (search for similar items in EconPapers)
Pages: 38
Date: 2007-05-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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