Vulnerability of Tax Revenues in Developing Countries

It has been conventional wisdom for quite some years now that a narrow tax base combined with an excessive reliance on a few commodity exports exposes countries to the risk of increased revenue volatility and, ultimately, lower tax collection. Beyond this general statement, however, there is still a knowledge gap regarding the relationship of exogenous shocks and public revenue in a broad (and increasingly diversified) range of low- and middle-income countries. Facing heterogeneity of cases combined with limited access to data, academic research has found it difficult to even develop consistent measures of tax capacity and tax performance in developing countries ¹ —let alone addressing the question of how revenue systems react to unforeseen external events.