Progressive Taxation and Tax Revenue Across Development

by Gabriel Zucman (UC Berkeley) and Anders Jensen (Harvard Kennedy School)

For a presentation of this research, see here.

Why do developing countries have low tax-to-GDP ratios? Is it because they are not able to tax (due, e.g., to the informal structure of the economy) or because they are not trying to tax (due, e.g., to political economy reasons leading to low tax rates on high-income earners)? To address this question, this project aims at estimating tax progressivity in a large set of countries across levels of development, by combining national account data, tax statistics, and legislative information. This will allow us to analyze whether tax progressivity can account for differences in tax-to-GDP ratios across development levels today. As a useful benchmarking exercise, we will equalize tax progressivity across developing countries, assuming no behavioral responses, in order to estimate the share of the tax revenue gap that can be explained by lower taxes on top-earners.