You searched for: Publishing Institution The John F. Kennedy School of Government at Harvard University Remove constraint Publishing Institution: The John F. Kennedy School of Government at Harvard University Political Geography Indonesia Remove constraint Political Geography: Indonesia Publication Year within 25 Years Remove constraint Publication Year: within 25 Years Publication Year within 10 Years Remove constraint Publication Year: within 10 Years Topic Business Remove constraint Topic: Business
- Author: M. Chatib Basri, Mayara Felix, Rema Hanna, Benjamin A. Olken
- Publication Date: 10-2019
- Content Type: Working Paper
- Institution: The John F. Kennedy School of Government at Harvard University
- Abstract: Developing countries collect a far lower share of GDP in taxes than richer countries. This paper asks whether changes in tax administration and tax rates can nevertheless raise substantial additional revenue – and if so, which approach is most effective. We study corporate taxation in Indonesia, where the government implemented two reforms that differentially affected firms. First, we show that increasing tax administration intensity by moving the top firms in each region into “Medium-Sized Taxpayer Offices,” with much higher staff-to-taxpayer ratios, more than doubled tax revenue from affected firms over six years, with increasing impacts over time. Second, using non-linear changes to the corporate income tax schedule, we estimate an elasticity of taxable income of 0.59, which implies that the revenue-maximizing rate is almost double the current rate. The increased revenue from improvements in tax administration is equivalent to raising the marginal corporate tax rate on affected firms by about 23 percentage points. We suggest one reason improved tax administration was so effective was that it flattened the relationship between firm size and enforcement, removing the additional “enforcement tax” on large firms. On net, our results suggest that improving tax administration can have significant returns for developing country governments.
- Topic: Governance, Developing World, Reform, Business , Tax Systems
- Political Geography: Indonesia, Southeast Asia