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Low tax revenue collection limits the capacity of the state to provide public goods and invest in human capital, redistribute income, and insure against shocks. Although domestic revenue mobilization has increased in the past two decades, many low-income countries still collect less than 20 percent of their GDP in taxes, a level which is insufficient to address their citizens¡¯ needs.
In this Policy Research Talk, World Bank economist Pierre Bachas will discuss the differences in tax structures across countries and sketch some of the frontiers of research in this area. In an economy characterized by small-scale production and self-employment, taxation needs to factor in administrative feasibility, and thus optimal policies can vary markedly. He will illustrate the implications of these differences for growth and inequality using results from two recent papers. The first shows that in poorer countries tax enforcement falls disproportionately on large firms and estimates the loss in production from size-dependent enforcement. The second paper presents evidence that, once we account for the informal retail sector, taxes on consumption can be progressive, and discusses the implications for their optimal design.
The talk will conclude with a discussion of some of the challenges lying ahead to make tax systems more efficient and redistributive, and how improved administrative data and new technologies can help provide solutions.
Pierre Bachas is an Economist in the Macroeconomics and Growth Team in the Development Research Group. His research focuses on public finance in developing countries. In particular, on optimal tax design and challenges to tax collection faced by low- and middle-income countries as a result of tax evasion, informality and differences in economic structure. Prior to joining the bank he was a postdoctoral researcher at Princeton University. He holds a Bachelor and Masters in economics from the LSE and a PhD in Economics from UC Berkeley.
Marcello de Moura Estev?o Filho is the Global Director of the World Bank Group¡¯s Macroeconomics, Trade and Investment Global Practice (MTI). In this position, Mr. Estev?o leads a large team of country economists, macroeconomists, and fiscal policy, debt, and macro-modeling experts. He is responsible for overseeing the delivery of the global analytical work on fiscal policy, debt policy, and economics of climate change; for coordinating the strategic direction of MTI and implementing it; for helping to shape and oversee MTI¡¯s country/regional programs; and for mobilizing staff to work more effectively across Equitable Growth, Finance and Institutions (EFI) and other Global Practices.
Deon Filmer is Director of the Research Group at the World Bank. He has previously served as Acting Research Manager in the Research Group, Co-Director of the World Development Report 2018: Learning to Realize Education¡¯s Promise, and Lead Economist in the Human Development department of the Africa Region of the World Bank. He works on issues of human capital and skills, service delivery, and the impact of policies and programs to improve human development outcomes¡ªwith research spanning the areas of education, health, social protection, and poverty and inequality. He has published widely in refereed journals, including studies of the impact of demand-side programs on schooling and learning; the roles of poverty, gender, orphanhood, and disability in explaining education inequalities; and the determinants of effective service delivery.
The monthly Policy Research Talks showcase the latest findings of the World Bank¡¯s research department, challenge and contribute to the institution¡¯s intellectual climate, and re-examine conventional wisdom in current development theories and practice. These talks facilitate a dialogue between researchers and operational staff and inform World Bank operations both globally and within partner countries. Read More ?