Abstract:
Most developing countries face the problem of raising tax revenue to carry out public sector spending. Tax revenue is necessary for economic growth and development. Unfortunately tax revenue generation has been low in Asia region. In the present study, an attempt is made to analyze empirically the determinants of low tax revenue in selected emerging economies of Asia by employing instrumental variables generalized least squares (IV-GLS) techniques over the period 1997-2013. This study investigates the impact of economic variables, external variables and social indicators along with elements of tax base on tax revenue performance for selected emerging economies of Asia. The empirical results suggest that openness, broad money, external debt, foreign aid and political stability are the significant determinants of tax revenue with expected signs. The results also indicates that the main reason of low tax revenue ratios in these countries are because of narrow tax base, more dependence on agriculture sector, and low level of literacy rates. Finally, it is concluded that economy can generate high tax to GDP ratio by boosting the openness, literacy level, political stability and broadening the tax base and by controlling income inequality, tax evasion and tax exemptions.
