Public Finance and Economic Development
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World Bank, Washington, DC
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Low tax revenue and slow economic growth
are two central concerns in developing countries. However,
policies that raise tax revenue also harm economic growth.
With tax revenue coming mainly from large capital-intensive
firms, and with a large informal sector, policies that aid
large firms and policies that discourage entry of new firms
both help increase tax revenue. Entrepreneurial activity as
a result is discouraged, lowering growth. There is a basic
tension in policy design between current tax revenue and
economic growth. In fact, a loss in tax revenue can itself
reduce growth, due to less spending on education and
infrastructure. It can also undermine political support for
the reforms from the poor and from government bureaucrats,
both of whom are key beneficiaries of government
expenditures. What policies encourage growth without undue
loss of current expenditures? One is debt finance, but this
creates the risk of a financial crisis if tax revenue rises
too slowly to repay this debt. A second is user fees, but
such fees still undermine political support from the poor. A
third is partial reform, maintaining both higher taxes on
and some protection for easily taxed firms, even while
barriers to entry are eased.
Palabras clave
AGRICULTURE, ALLOCATION OF CREDIT, BANK DEPOSITS, BARRIERS TO ENTRY, BENEFICIARIES, CAPITAL INVESTMENT, CASH ECONOMY, CASH TRANSACTIONS, CHECKS, COMMODITY, CONFIDENCE OF INVESTORS, CONSUMPTION TAXES, CONVERSIONS, CORPORATE INCOME TAX, CORPORATE INCOME TAXES, CREDIBILITY, CREDIT CARDS, CRITICAL INFRASTRUCTURE, CURRENCY, DEBT, DEFICITS, DEFLATION, DEVELOPING COUNTRIES, DEVELOPING ECONOMIES, DISCOUNT RATE, DISTRIBUTION OF WEALTH, DOMESTIC MARKET, ECONOMIC ACTIVITY, ECONOMIC DEVELOPMENT, ECONOMIC DOWNTURN, ECONOMIC EFFICIENCY, ECONOMIC GROWTH, ECONOMIC LOSS, ECONOMIC REFORM, ECONOMIC REFORMS, ECONOMIC RESEARCH, ECONOMICS LITERATURE, ENVIRONMENTAL BENEFITS, EVASION, EXCISE TAX, EXCISE TAXES, EXISTING INFRASTRUCTURE, EXPENDITURE, EXTERNALITIES, FINANCIAL CRISIS, FINANCIAL SECTOR, FISCAL DEFICIT, FISCAL POLICIES, FISCAL POLICY, FLOWS OF CAPITAL, FORECASTS, FOREIGN COMPETITION, FOREIGN EXCHANGE, FOREIGN OWNERS, FREE TRADE, FUTURE GROWTH, GDP, GDP PER CAPITA, GLOBALIZATION, GOVERNMENT DEBT, GOVERNMENT EXPENDITURES, GOVERNMENT FINANCES, GOVERNMENT POLICIES, GOVERNMENT REVENUE, GROWTH RATES, GROWTH THEORY, IMPLICIT TAX, INCOME, INCOME TAX, INCOME TAXES, INCOMES, INDIRECT TAXATION, INFLATION, INFLATION RATE, INFLATION RATES, INFORMAL ECONOMY, INFRASTRUCTURE DEVELOPMENT, INFRASTRUCTURE INVESTMENT, INFRASTRUCTURE INVESTMENTS, INFRASTRUCTURE PROJECTS, INTEREST RATE, INTERNATIONAL BANK, INTERNATIONAL DEVELOPMENT, INTERNATIONAL ECONOMICS, INTERNATIONAL FINANCE, INTERNATIONAL TRADE, LENDERS, LEVEL OF DEBT, LEVEL OF INFLATION, LICENSES, LOAN, MACROECONOMIC ENVIRONMENT, MARGINAL COST, MARKET INTEREST, MARKET INTEREST RATE, MARKET PRICES, MARKET REFORM, MARKET REFORMS, MONETARY POLICY, MONOPOLY, NATURAL RESOURCES, NEW MARKET, NEW MARKET OPPORTUNITIES, NEW PRODUCTS, NOMINAL INTEREST RATE, OPTIMAL TAXATION, OUTPUT, POLICY RESPONSE, POLITICAL ECONOMY, POLITICAL STABILITY, POLITICAL SYSTEMS, PREFERENTIAL ACCESS, PRIVATE FINANCING, PRIVATIZATION, PROBABILITY OF DEFAULT, PUBLIC, PUBLIC ECONOMICS, PUBLIC EXPENDITURE, PUBLIC EXPENDITURES, PUBLIC FINANCE, PUBLIC POLICY, RAPID ECONOMIC GROWTH, RAPID GROWTH, RATE OF INVESTMENT, REAL GDP, REAL GROWTH RATE, REAL INTEREST, REAL INTEREST RATE, REGISTRATION FEES, REPAYMENT, RESTRICTED FOREIGN OWNERSHIP, RESTRICTIONS ON ENTRY, RETURN, ROADS, SKILLED WORKERS, TARIFF REVENUE, TARIFF REVENUES, TAX, TAX BASE, TAX CHANGES, TAX COLLECTION, TAX COMPLIANCE, TAX EVASION, TAX POLICIES, TAX POLICY, TAX RATE, TAX RATES, TAX REFORM, TAX REFORMS, TAX REVENUE, TAX STRUCTURE, TAX STRUCTURES, TAX SYSTEM, TAXATION, TELECOMMUNICATIONS, TRADE BARRIERS, TRADE LIBERALIZATION, TRADE LIBERALIZATIONS, TRADES, TRADING, TRANSACTION, TRANSFER PAYMENTS, TRANSFER TAXES, TURNOVER, TURNOVER TAXES, UTILITIES, UTILITY FUNCTION, VOLATILITY, WAGES