Assessing Revenue Authority Performance in Developing Countries: A Synthetic Control Approach

ABSTRACT

In many developing countries, comprehensive reforms have been undertaken in tax administration during recent years and the implementation of semiautonomous revenue authorities (SARAs) constitutes one of their most visible expressions. To date, no comprehensive assessment has been undertaken to investigate how successful these SARAs have been in improving revenue collection in these countries. Therefore, this article attempts to fill this gap by assessing revenue collection trends in 20 developing countries after the SARA has been implemented. Using the synthetic control method, we show that in most countries, the implementation of a SARA did not significantly improve government revenues.

KEYWORDS:

• Developing countries
• public sector reform
• revenue authority
• synthetic control method
• tax administration

Notes

¹ For a comprehensive literature on NPM, see for instance Pollitt (1993) and Manning (2001).

² See Table A.2 for a complete list of countries having established a SARA.

³ Color revolutions make reference to the Serbian Bulldozer revolution (2000), the Georgian Rose revolution (2003), the Ukrainian Orange revolution (2004), and the Kyrgyz Tulip revolution (2005).

⁴ To construct this sample, we started by including all developing countries and then excluded countries for which there are no complete longitudinal series on government revenue. See the Tables A.1 and A.2 for the list of countries.

⁵ SARAer refers to the treated country, i.e., country with a SARA.

⁶ See Table A.1 (Appendix section) for the Annual Average Impact by country.

⁷ Taliercio (2004) analyzes revenues authorities in six countries: Kenya, Mexico, Peru, South Africa, Venezuela, and Uganda. He looks at the degree of autonomy and its impact on tax collection. Revenue Authorities in Kenya, Peru, and South Africa were more autonomous and seemed to be more effective in increasing tax revenue. But his analysis did not take into account other exogenous factors that can affect tax revenue.

⁸ “Creating a SARA is clearly expensive, may take a long time and require significant effort, and does not actually improve tax administration effectiveness” Kidd and Crandall (2006, p. 53).