Challenges of Tax Administration in Developing Countries: Insights from the 5th Annual Tax Administration Research Centre Workshop, 2017

Abstract

Tax administration is a challenging task, but developing countries’ tax administrations face greater challenges than their counterparts in advanced countries. As a result of these challenges, tax revenue generation in developing countries is unusually low. The issue has been at the forefront of academic and international development administration discourse since Nicholas Kaldor raised the red flag in 1963. Kaldor stated that developing countries raise about 8 to 15 percent of their Gross Domestic Product (GDP) as tax revenue, while the ratio for advanced countries is 25 to 30 percent. More than sixty years after this issue came to the fore, and after more than thirty years of tax administration reforms in developing countries, it remains largely unresolved. The 5th Annual Tax Administration Research Centre (TARC) Workshop provided delegates with an opportunity to further discuss the issue. This paper presents insights from that workshop. Our analysis of insights from the workshop provides a fresh perspective on the challenges of tax administration in developing countries. Most importantly, we argue that the challenges of tax administration in developing countries are complex and involve deep-rooted, systemic problems that cannot be tackled by tax administration alone. Some of the problems are linked to acts of omission and commission by political leadership. This may account for the continued low levels of tax collection in developing countries despite the fact that series of tax administration reforms have taken place.