Handbook of Public Economics, Vol. 5

Chapter 2

Taxation and Development

Timothy Besley^* and Torsten Persson^†,    *LSE and CIFAR, ^†IIES, Stockholm University and CIFAR

Abstract

The central question in taxation and development is: “how does a government go from raising around 10% of GDP in taxes to raising around 40%?” This paper looks at the economic and political forces that shape the way that fiscal capacity is created and sustained. As well as reviewing the literature and evidence, it builds an overarching framework to help structure thinking on the topic.

Keywords

Fiscal capacity; Taxation; Development; Administration and compliance; Revenue authorities

It is shortage of resources, and not inadequate incentives, which limits the pace of economic development. Indeed the importance ...