Assessing Tax Performance in Developing Countries: A Critical Review of the Literature

This chapter outlines a number of reasons that have been put forward in support of the international comparison approach to assessing national tax performance. It reviews the major varieties of such studies which have been carried out to date, with special attention to the recent group of ‘tax effort’ studies. An explicit use of international comparisons in relation to aid might be as a basis for allocating aid, both among the recipients and the donors. The tax effort studies employ an implicit norm of proportionality with respect to the ‘ability to give up’. The use of the usual tax effort formula to set the underlying standard for normative purposes presupposes that the tax ratio should increase by the same amount for equal absolute changes in per capita income.