The determinants of tax revenue: A study of Southeast Asia

Figures & data

Table 1. Definitions of the variables

Variable	Definition	Source
TAXREV	The ratio of total tax revenue to GDP	WDI
GDPPC	Growth in GDP per capita	WDI
TRADE	Sum of exports and imports as a percentage of GDP	WDI
FDI	Net FDI inflows in GDP (% of GDP)	WDI
ARG	Proportion of value added in agriculture (%)	WDI
IDN	Proportion of value added in manufacturing (%)	WDI
POLRIG	Political rights index	Freedom House
CIVLIB	Civil liberties index	Freedom House
SCHTER	The ratio of public expenditure on education as a percentage of GDP	WDI
LIFEEXP	Average life expectancy of the population	WDI
INFMOR	The number of deaths per 1,000 live births	WDI
EXDEBT	Cumulative external public debt as a percentage of GDP	WDI
ODA	Percentage of net ODA inflows in comparison with GDP (%)	WDI
INF	Inflation (% of CPI)	WDI

Table 2. Descriptive statistics

Variable	Mean	SD	Min.	Max.	Obs.
TAXREV	12.50	4.63	2.00	22.40	136
GDPPC	5.02	2.80	−4.27	12.69	136
TRADE	99.81	53.02	0.17	220.41	136
FDI	3.62	2.83	−2.59	13.07	136
AGR	21.59	12.60	8.01	57.24	136
IND	34.04	8.63	9.69	48.53	136
POLRIG	5.03	1.90	2.00	7.00	136
CIVLIB	4.66	1.24	3.00	7.00	136
SCHTER	2.66	1.39	0.30	5.89	136
LIFEEXP	68.76	4.67	58.43	76.25	136
INFMOR	3.26	0.71	1.90	4.41	136
EXDEBT	38.44	24.52	9.06	155.18	136
ODA	2.79	3.96	−0.64	16.92	136
INF	6.17	7.70	−1.71	57.07	136

Table 3. Stationarity test results

Variable	Levin-Lin-Chu		Im-Pesaran-Shin		Result
	Without time trend	With time trend	Without time trend	With time trend
TAXREV	0.0440	0.0000	0.1106	0.0267	Stationary
GDPPC	0.0001	0.0000	0.0007	0.0028	Stationary
TRADE	0.1510	0.0040	0.7838	0.1355	Nonstationary
FDI	0.0013	0.0000	0.0276	0.0541	Stationary
AGR	0.1399	0.1267	0.6419	0.8371	Nonstationary
IND	0.2539	0.0352	0.9506	0.5973	Nonstationary
POLRIG	0.7079	0.6332			Nonstationary
CIVLIB	0.5355	0.2375			Nonstationary
SCHTER	0.0000	0.0011	0.0000	0.0082	Stationary
LIFEEXP	0.9999	0.0000	0.9779	0.0000	Nonstationary
INFMOR	0.0000	0.0080	0.0000	0.8951	Stationary
EXDEBT	0.0009	0.0026	0.1649	0.6403	Nonstationary
ODA	0.0213	0.0000	0.2304	0.0000	Stationary
INF	0.0000	0.0000	0.0000	0.0000	Stationary
∆TRADE	0.0000	0.0000	0.0000	0.0000	Stationary
∆IND	0.0000	0.0000	0.0000	0.0000	Stationary
∆AGR	0.0000	0.0000	0.0000	0.0000	Stationary
∆POLRIG	0.0000	0.0000			Stationary
∆CIVLIB	0.0000	0.0000			Stationary
∆LIFEEXP	0.0000	0.0000	0.0000	0.0000	Stationary
∆EXDEBT	0.0000	0.0000	0.0000	0.0000	Stationary

Lag length selected using Akaike information criterion.

Table 4. Panel cointegration test (Dependent variable: TAXREV)

Variable	Gt(p-value)	Ga(p-value)	Pt(p-value)	Pa(p-value)	Result
GDPPC	0.000	0.693	0.965	0.783	No cointegration
TRADE	0.013	0.000	0.893	0.605	Cointegration
FDI	0.000	0.000	0.008	0.003	Cointegration
AGR	0.000	0.011	0.000	0.001	Cointegration
IND	0.000	0.002	0.000	0.000	Cointegration
POLRIG	0.000	1.000	0.929	0.149	No cointegration
CIVLIB	0.000	0.000	0.526	0.000	Cointegration
SCHTER	0.000	0.004	0.004	0.073	Cointegration
LIFEEXP	0.000	0.995	0.000	0.941	No cointegration
INFMOR	0.000	0.844	0.851	0.512	No cointegration
EXDEBT	0.000	0.007	0.072	0.056	Cointegration
ODA	0.000	0.065	0.002	0.000	Cointegration
INF	0.000	0.008	0.072	0.000	Cointegration

Table 5. Multicollinearity test

Variable	VIF	SQRT (VIF)	Tolerance	R-Squared
TRADE	4.23	2.060	0.237	0.763
FDI	1.97	1.400	0.507	0.493
AGR	14.65	3.830	0.068	0.932
IND	4.38	2.090	0.228	0.772
CIVLIB	3.57	1.890	0.280	0.720
SCHTER	5.75	2.400	0.174	0.826
EXDEBT	3.03	1.740	0.330	0.671
ODA	3.85	1.960	0.260	0.740
INF	1.56	1.250	0.640	0.360
Mean VIF	4.78

The results of VIF analysis after removing AGR variable are presented in Table 6. All variables have VIF less than 10. Therefore, there is no multicollinearity in the model.

Table 6. Multicollinearity test

Variable	VIF	SQRT (VIF)	Tolerance	R-Squared
TRADE	4.10	2.030	0.244	0.756
FDI	1.82	1.350	0.549	0.452
IND	3.03	1.740	0.330	0.670
CIVLIB	1.86	1.360	0.537	0.463
SCHTER	5.05	2.250	0.198	0.802
EXDEBT	3.00	1.730	0.333	0.667
ODA	3.60	1.900	0.278	0.722
INF	1.41	1.190	0.707	0.293
Mean VIF	2.98

Table 7. Static model regression results

Variable	Pooled OLS	FEM	REM
TRADE	0.0148*	−0.00649	0.0148*
	(0.00881)	(0.00771)	(0.00881)
FDI	0.230**	0.256***	0.230**
	(0.110)	(0.0696)	(0.110)
IND	0.154***	0.186***	0.154***
	(0.0466)	(0.0491)	(0.0466)
CIVLIB	−0.0306	0.286	−0.0306
	(0.253)	(0.266)	(0.253)
SCHTER	1.818***	−0.0252	1.818***
	(0.373)	(0.264)	(0.373)
EXDEBT	0.00438	0.0107	0.00438
	(0.0163)	(0.0111)	(0.0163)
ODA	0.209*	−0.176**	0.209*
	(0.110)	(0.0818)	(0.110)
INF	0.0216	0.0276	0.0216
	(0.0356)	(0.0176)	(0.0356)
Constant	−0.616	4.524	−0.616
	(2.259)	(2.791)	(2.259)
Observation	136	136	136
R-squared	0.685	0.421
F test (p-value)	0.000	0.000
F test (ui = 0, p-value)		0.000
Wald chi2 (p-value)			0.000
Number of countries		8	8

Standard errors in parentheses. ***, **, and * statistically significant at 1%, 5%, and 10%.

Table 8. Regression results with the Driscoll-Kraay method

Variable	FEM	Driscoll-Kraay
TRADE	−0.00649	−0.00649
	(0.00771)	(0.0148)
FDI	0.256***	0.256***
	(0.0696)	(0.0800)
IND	0.186***	0.186*
	(0.0491)	(0.0966)
CIVLIB	0.286	0.286
	(0.266)	(0.348)
SCHTER	−0.0252	−0.0252
	(0.264)	(0.229)
EXDEBT	0.0107	0.0107
	(0.0111)	(0.0125)
ODA	−0.176**	−0.176**
	(0.0818)	(0.0816)
INF	0.0276	0.0276
	(0.0176)	(0.0190)
Constant	4.524	4.524
	(2.791)	(3.548)
Observations	136	136
R-squared	0.4210	0.4207
F test (p-value)	0.000	0.0000
Number of countries	8	8

Standard errors in parentheses. ***, **, and * statistically significant at 1%, 5%, and 10%.

Table 9. Regression results with the system-GMM model

Variable	Sys-GMM
L.TAXREV	0.865***
	(0.06468)
TRADE	0.0113*
	(0.00634)
FDI	0.0747
	(0.06764)
IND	0.0729**
	(0.03428)
CIVLIB	0.116
	(0.1619)
SCHTER	−0.134
	(0.25867)
EXDEBT	0.0138*
	(0.00774)
ODA	−0.0448
	(0.053643)
INF	0.00273
	(0.014143)
Constant	−2.647
	(1.665)
Observations	128
Countries	8
F test (p-value)	0.000
Sargan test (p-value)	0.182
AR (1) (p-value)	0.001
AR (2) (p-value)	0.354
Difference-in-Sargan tests of exogeneity of GMM instrument subsets (p-value)
Sargan test excluding group	0.384
Difference (null H = exogenous)	0.159

Standard errors in parentheses. ***, **, and * statistically significant at 1%, 5%, and 10%.

Table 10. Summary of the estimated results

Variable	Driscoll-Kraay	Sys-GMM
L.TAXREV		0.865***
		(0.06468)
TRADE	−0.00649	0.0113*
	(0.0148)	(0.00634)
FDI	0.256***	0.0747
	(0.0800)	(0.06764)
IND	0.186*	0.0729**
	(0.0966)	(0.03428)
CIVLIB	0.286	0.116
	(0.348)	(0.1619)
SCHTER	−0.0252	−0.134
	(0.229)	(0.25867)
EXDEBT	0.0107	0.0138*
	(0.0125)	(0.00774)
ODA	−0.176**	−0.0448
	(0.0816)	(0.053643)
INF	0.0276	0.00273
	(0.0190)	(0.014143)
Constant	4.524	−2.647
	(3.548)	(1.665)
Observations	136	128
Countries	8	8
F test (p-value)	0.000	0.000
R-squared	0.421
Sargan test (p-value)		0.182
AR (1) (p-value)		0.001
AR (2) (p-value)		0.354
Difference-in-Sargan tests of exogeneity of GMM instrument subsets (p-value)
Sargan test excluding group		0.384
Difference (null H = exogenous)		0.159

Standard errors in parentheses. ***, **, and * statistically significant at 1%, 5%, and 10%.

Table

Chi2	60.37
Prob>chi2	0.0000

Table

Chi2	71.58
Prob>chi2	0.0000

Table

F	95.671
Prob>F	0.0000