Taxation and public finance in transition and developing economies

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Why do individuals resist tax compliance with their tax commitments and why does this situation differ internationally?

The question has been extensively researched from the theoretical perspectives of general deterrence theory, economic deterrence models and fiscal psychology (Cuccia 1994). This study takes the view that the actions of governments can best explain the phenomenon of tax compliance internationally.


It shows that where governments reduce bureaucracy and increase the control of corruption, tax compliance will be at its highest. It argues for an implicit social contract where the government and/or the state create a tax environment unburdened by the inefficiencies of bureaucracy, and corruption for tax compliance to be effective. This is especially crucial for developing countries where economic development can be drastically hampered by lower public revenues from lack of tax compliance.

The second section of the paper describes the relationship of bureaucracy, corruption, and tax compliance. The third section describes the data. The fourth section presents the regression analysis and discussions, and the fifth section concludes