Capital Taxation, Development, and Globalization

PierreBachas† ,MatthewFisher-Post‡ ,AndersJensen§ ,GabrielZucman¶

May2024 Abstract

Thispaperbuildsandanalyzesanewglobalmacro-historicaldatabaseofeffective taxratesoncapitalandlaborin154countries.Weestablishanewstylizedfact:while effectivecapitaltaxratesfellindevelopedcountriesbetween1965and2018,theyrose indevelopingcountriessince1990.Multipleresearchdesignsatthecountry,sector andfirm-levelsuggestthattradeopennesscontributedtothisrise,byincreasingthe shareofoutputproducedincorporationsandlargerfirms,whereeffectivecapital taxationishigher.Incontrasttoacommonview,globalizationappearsinmany countriestohavesupportedgovernments’abilitytotaxcapital.

∗Thispaperwaspreviouslycirculatedunderthetitle"GlobalizationandFactorIncomeTaxation."The databasebuiltinthispaperisavailableonlineat http://globaltaxation.world.Additionalmaterialis availableintheonlinesupplementaryappendix: linkhere.Weacknowledgefinancialsupportfromthe WeatherheadCenterforInternationalAffairsatHarvardUniversityandtheWorldBankDevelopment Economics’ResearchSupportBudget.ZucmanacknowledgessupportfromtheStoneFoundation.We areindebtedtoElieGerschel,XabierMoriana,RafaelProença,RoxanneRahnamaandAntonReinicke forexcellentresearchassistance.WethanknumerousseminarparticipantsandinparticularPierreBoyer, DamienCapelle,DenisCogneau,MartinFiszbein,JasonFurman,SimonGalle,PinelopiGoldberg,Gordon Hanson,AmitKhandelwal,DavidLagakos,EtienneLehmann,JulianaLondoño-Vélez,BenjaminMarx, SergeyNigai,MathieuParenti,StevenPennings,NamPham,ThomasPiketty,TristanReed,AriellReshef, BobRijkers,DaniRodrik,NicholasRyan,EmmanuelSaez,NoraStrecker,RomainWacziarg,DanielYiXu andRomanZarateforinsightfulcommentsanddiscussions.Thefindings,interpretations,andconclusions expressedinthispaperarethoseoftheauthorsanddonotrepresenttheviewsoftheWorldBankand itsaffiliatedorganizations,orthoseoftheExecutiveDirectorsoftheWorldBankorthegovernmentsthey represent.

†ESSEC-BusinessSchoolandWorldBankResearch,pbachas@worldbank.org

‡ParisSchoolofEconomics,mfp@psemail.eu

§HarvardKennedySchoolandNBER,anders_jensen@hks.harvard.edu

¶ParisSchoolofEconomics,UCBerkeleyandNBER,zucman@berkeley.edu

1Introduction

Howhasglobalizationaffectedtherelativetaxationofcapitalandlabor?Hasituniformly erodedtheamountoftaxespaidbycapitalowners,shiftingtheburdentoworkers? Orhavesomecountriesmanagedtoincreaseeffectivecapitaltaxrates,andifsohow? Answeringthesequestionsiscriticaltobetterunderstandthemacroeconomiceffectsand socialsustainabilityofglobalizationinuncertaintimes (Goldberg&Reed, 2023).

Basedonanewlong-runglobaldatabaseofeffectivetaxratesoncapitalandlabor, wedocumentthatindevelopingcountries,effectivecapitaltaxrateshaveincreasedin thepost-1990eraofhyper-globalization.Consistentlyacrossseveralresearchdesigns,we findthatasignificantshareofthisrisecanbeexplainedbytradeopenness.Byexpanding theshareofeconomicactivityoccurringinthecorporatesector,andwithinthecorporate sectorinlargerfirms,ourresultsshowthattradeimprovestheeffectivecollectionoftaxes, particularlycorporateincometaxes.Globalizationhasalsohadwidelynotednegative effectsoncapitaltaxation,duetointernationaltaxcompetitionthatappliesdownward pressureoncorporatestatutorytaxrates.Wefindthatthepositivetaxcapacityeffectof tradeweuncoverprevailedindevelopingeconomies,causingopennesstoincreaseoverall governmenttaxrevenues(asa%ofGDP).Therevenueconsequencesofglobalization havenotbeensystematicallyinvestigatedindevelopingcountriesduetolimiteddata, andconcernsoverpotentialrevenuelosseshavepersistedasakeyobstacletofurther integrationacrossborders (WorldBank, 2020). Incontrasttoacommonview,ourfindings showthatglobalizationhasnotuniformlyerodedgovernments’abilitytoraiserevenue, andinsteadappearstohavesupportedcapitaltaxationinmanycountries.

Toestablishtheseresults,thispapermakestwocontributions.Thefirstistobuild andanalyzeamacro-historicaldatabaseofeffectivetaxratesoncapital(ETRK )andlabor (ETRL)covering154countries,withoverhalfstartingin1965,until2018.Each ETR dividesalltaxescollectedonthefactorbythenationalincomethataccruestoit;byrelying onactualtaxescollected, ETRscapturethenetpasteffectofalltaxrulesand,importantly fordevelopingcountries,taxevasionandavoidance.Complementarytoexisting ETR seriesthatfocusondevelopedcountries,ourdataprovidesaglobalcoveragebydigitizing andharmonizingthousandsofhistoricalandrecentpublicfinancerecordsindeveloping countries.Theglobaldatabaseallowsustosystematicallycharacterizetheevolutionof effectivetaxratesindevelopingcountriesandcomparetrendsacrossdevelopmentlevels.

Anovelfactemergesfromthisdatabase:theevolutionofcapitaltaxationhasbeen asymmetricacrossdevelopmentlevels.Inhigh-incomecountries,effectivecapitaltax ratesdeclined,fromahighof38-39%inthelate1960sto32-33%inthelate2010s.By

contrast,indevelopingcountries,effectivecapitaltaxrateshavebeenonarisingtrend sincethebeginningofthe1990s,albeitstartingfromalowlevel.Effectivecapitaltax ratesrosefrom10%in1989to18%in2018,withmorepronouncedincreasesinlarger economies.Forexample, ETRK rosefrom6%to24%inChina,5%to12%inIndia,and 7%to27%inBrazil.Thepositivetrendincapitaltaxationisdrivenbythecorporatesector: theaverageeffectivecorporatetaxraterosefrom12%in1989to20%in2018.

Thisriseofcapitaltaxationinlow-andmiddle-incomecountrieshadnotbeennoted intheliteraturebefore,duetoalackofdataontheevolutionoftaxationglobally.The findingappearsrobust.Itholds:whenweexcludeChinaandoil-richcountries;with otherapproachestocomputingcapitalandlaborincomeinunincorporatedbusinesses (wherefactorsharesarenotdirectlyobservable);andwithalternativewaysofsplitting personalincometaxrevenuebetweencapitalversuslabor.

Oursecondcontributionistoformulateandtestahypothesisthatshedslightonthe riseofcapitaltaxationindevelopingcountries.Wehypothesizethatopennessexertsa positiveeffectondevelopingcountries’capacitytotax,consistentwithtradeleadingtothe expansionoflargerfirmsrelativetosmallerones (Mrázová&Neary, 2018) andfirm-level effectivetaxationrisingwithsize,duetobetterenforcementandhigherstatutorytaxburdens (Almunia&Lopez-Rodriguez, 2018;Best,Shah,&Waseem, 2021).1 Ourhypothesis ismotivatedbytheobservationthattherisein ETRK coincideswithtradeliberalization. Sincethebeginningofthe1990s,manydevelopingcountriesopenedtheirmarketsand reducedtariffs,leadingtoaboomininternationaltradethatreshapedtheeconomiesof Mexico,India,andChinaamongothers (Goldberg, 2023). Bydisproportionatelybenefitinglargerfirms,tradecanincreasetheshareofeconomicactivityincorporationsand moreformalbusinesses,whereeffectivetaxationofcapital(andlabor)ishigher.

Tomotivatethetaxcapacityhypothesis,Figure 1 showsthattheshareofdomestic outputfromthecorporatesector(profitsandemployeecompensation)hasgrownover timeindevelopingcountries,attheexpenseofmixed-income(incomeofself-employed andunincorporatedbusinesses).Whilethecorporatesectoraccountedfor53%ofdomestic outputin1989,priortothehyper-globalizationera,itgrewto62%by2018;mixedincome fellfrom32%to20%overthesameperiod.Thus,developingcountrieshaveexperienced arelocationofactivityfromahard-to-taxsectortoasectorwithstrongereffectivetaxation.

1Highereffectivetaxationinthecorporatesectorstemsbothfromstrongerenforcementandhigherstatutory taxesthaninthenon-corporatesector.Ournotionoftaxcapacityisthattheseco-determinedforcesjointly leadtohigher ETRK withfirmsize(wheresizeismeasuredasfirmoutput,inourcaserevenue).

Weestablishthesecondcontributionintwosteps.First,westudytheimpactoftrade ontaxationindevelopingcountries,withafocuson ETRK andcorporatetaxes.Second, westudymechanismsthatlinktradetotaxation,withafocusonthetaxcapacitychannel.

Weimplementthreeresearchdesignstostudyhowtradeimpactstaxation.First,we estimatethenon-parametricassociationwithinacountryovertimebetween ETR and tradeopenness.Second,weanalyzemajortradeliberalizationeventsthatoccurredin sevenlargedevelopingcountries,includingChina’sWTOaccessionin2001,andcaused sharpreductionsintradebarriers (Brandt,Biesebroeck,Wang,&Zhang, 2017;Goldberg& Pavcnik, 2016). Weusesyntheticcontrolmethodsandpresentevent-studyresults.Third, weextendthetradeinstrumentsfrom Egger,Nigai,andStrecker(2019) tooursample.

Allthreedesignsshowthat,indevelopingcountries,tradeleadstoalargeincreasein ETRK ,andasmallerincreasein ETRL.Theeffectissizable:tradeopennesscanaccount for33%ofthedocumentedrisein ETRK since1989.Althoughstudyingmacroeconomic outcomespresentsidentificationchallenges,theresultsareconsistentacrossresearchdesigns,whichdifferintheiridentifyingassumptions,andarerobusttonumeroussensitivity checks.Acrosstheresearchdesigns,wealsofindthattradeleadstoanincreaseintotal taxrevenues(asa%ofGDP).Reflectingtrade’spositiveimpacton ETRK ,overhalfof thisincreasecomesfromhighercorporateincometaxes(CIT),andasmallersharefrom personalincometaxesandpayroll.Indirecttaxes(combiningtariffrevenuesanddomestic consumptiontaxes)slightlyrise,butthecoefficientisnotsignificant.

Wethenturntoinvestigatemechanisms.IntheIVandliberalizationevent-studies, wefindthattradeincreasestheshareofdomesticoutputproducedinthecorporate sector,relativetotheunincorporatedbusinesssector(mixed-income).2 Thus,outputis expandedinthecorporatesectorwhereenforcementisstrongerandeffectivetaxationis higher (Slemrod&Velayudhan, 2018). Moreover,withinthecorporatesectorwefindthat tradeincreasestheaverageeffectivetaxrateoncapital,suggestingtheexpandedcorporate outputaccruestofirmswhose ETRK increaseswiththeiroutput(ourproxyforfirmsize). Thesetwoeffectsoftradeareconsistentwiththetaxcapacitychannel.Simultaneously,we findthattradereducesthestatutorycorporatetaxrate,consistentwithataxcompetition channelwhereglobalizationpushesgovernmentstoreducethestatutorytaxburdenon capital.Onnet,thepositivetaxcapacityimpactoutweighsthetaxratereductionin developingcountries,causingtradetoincrease ETRK atthecountry-level.

Incontrast,wefindnotaxcapacityeffectoftradeindevelopedcountries,butastronger decreaseinstatutorycorporatetaxrates.Theseresultshelpreconciletheasymmetric evolutionofcapitaltaxationindevelopinganddevelopedcountries.

2Tradeleadstoasharpriseincorporateprofitsandaninsignificantchangeinemployeecompensation.

Wesharpenourmechanismanalysisbyconductingafirm-levelinvestigationofthetax capacitychannel.WemergemultipleadministrativedatasetsinRwanda,whichallows ustoobserveeachfirm’sintegrationintointernationaltradeandcorporatetaxpayments. Theintegrationmeasureaccountsforthefirm’sindirectexposuretotradethroughits productionnetwork (Almunia,Hjort,Knebelmann,&Tian, 2023). Rwandaprovidesan interestingsetting:startingfromarelativelylowshareofdomesticoutput,thecorporate sectorhasgrownsignificantlysincethe1990s,intandemwithariseintradeopennessand taxcollection.Usingtheshift-sharedesignof Hummels,Jørgensen,Munch,andXiang (2014)foridentifyingvariation,wefindthattradeintegrationincreasesbothafirm’s ETRK anditssize.Thoughlimitedtoasinglecountry,thesefirm-levelresultsprovidemicroevidencefortrade’spositiveimpacton ETRK ,andsupportthetaxcapacitymechanism wherebytrade’simpactismediatedbyapositivefirmsize-ETRK gradient.

Finally,westudysourcesofheterogeneityinthepro-taximpactoftrade.Duringour sampleperiod,developingcountrieshaveinvestedindomestictaxenforcement,suchas largetaxpayerunits (C.Basri,Felix,Hanna,&Olken, 2019). Wefindthattrade’simpacts onthetaxcapacitymechanismandon ETRK holdintheabsenceoftheseenforcement policiesand,moregenerally,outsideofperiodsofsignificantfiscalpressure (Cagé& Gadenne, 2018). Thus,trade’spro-taximpactappearstobeabroadfeatureoftheglobalizationprocesswhichdoesnothingeongovernments’initialenforcementandrevenue needs.Atthesametime,wefindthatopenness’pro-taximpactdependsonthenature ofthetradeshock,inwaysthatareconsistentwithrecenttheoreticalworkontradeand formalization (Dix-Carneiro,Goldberg,Meghir,&Ulyssea, 2021).

Combiningmultipleempiricalstrategies,ourresultsatthecountry,corporatesector, andfirm-levelconsistentlysuggestthattradeopennessincreases ETRK andcontributedto thenewlydocumentedriseof ETRK indevelopingcountriessincetheearly1990s.Based onanewglobaldatabase,ourfindingsshowthatglobalizationhassupportedeffective capitaltaxationandoverallrevenuecollectioninmanycountriesaroundtheworld.

Section 2 discussesrelatedliterature.Section 3 describesthemethodologyanddata. Section 4 presentsfindingsonthelong-runevolutionof ETR.Section 5 analyzestrade’s impacton ETR andSection 6 investigatesthemechanisms.Section 7 concludes.

2RelatedLiterature

Globalizationandtaxstructure

Ourpapercontributestothemacroliteratureonglobalizationandtaxstructure (Alesina&Wacziarg, 1998), reviewedin Adam,Kammas,and Rodriguez(2013). The“racetothebottom”hypothesispositsthatgovernmentsreduce

taxesonfactorsthatbecomemoremobile(e.g.,capital)followingtradeliberalization (Slemrod, 2004). Toachieverevenueneutrality,governmentsraisetaxesonlessmobile factors(e.g.,labor).3 The“socialinsurance”hypothesispostulatesthatgovernmentsraise revenuetoinsureworkersdisplacedbyinternationalcompetition,oftenviasocialsecurity andpayrolltaxes (Rodrik, 1998). Thesestudiesmainlyfocusedonhigh-incomecountries. Byexpandingthescopetodevelopingcountries,weformulateandtestanewmechanism, wheretradeincreases ETR byexpandingactivityinfirmswithhighereffectivetaxcollection.Ourresultssuggestthatglobalizationhassupportedtheabilityofgovernments totaxcapitalinmanycountries.

Ourresultsarebasedonanewglobaldatabaseofeffectivetaxrates,whichcomplementsexistingdatasets (includingCarey&Rabesona, 2004;Kostarakos&Varthalitis, 2020;McDaniel, 2007) byexpandingcoveragetodevelopingcountries(detailsinSection 3).4 Ourbackward-looking ETR measureiscomplementarytotheliteratureonforwardlookingcapitaltaxrates (includingDevereux&Griffith, 1999), whichmodelsindetailthe statutorytaxburdenafirmwouldfaceunderdifferentconditions.Thisliteraturefinds thatthestatutorytaxburdenoncapitalhasfallenindevelopedanddevelopingcountries, consistentwiththe’racetobottom’mechanism (includingDevereux,Griffith,&Klemm, 2002;R.Kumar&James, 2022;Steinmüller,Thunecke,&Wamser, 2019).

Effectivetaxationandtradeindevelopingcountries Ourpapercontributestothemicroorientedliteratureontradeandpublicfinanceindevelopingcountries.Manystudiesfocus on bordertaxes andevasion (e.g.,Fisman&Wei, 2004;Javorcik&Narciso, 2017;Sequeira, 2016)orcross-borderincome-shifting(e.g.,Bilicka, 2019;Londoño-Vélez&Tortarolo, 2022; Wier, 2020). Wefocusinsteadontrade’simpactsonthe domestictaxbases ofcapitaland laboranddomesticeconomicstructure.5 Ourresultsareintuitivewhenconsideringthat thetradeliteraturefindspositiveeffectsofopennessondomesticoutcomesincluding marketshares (McCaig&Pavcnik, 2018), firmsize (Alfaro-Ureña,Manelici,&Vasquez, 2022), andlocaldevelopment (Méndez&VanPatten, 2022), whichthepublicfinance literaturehasseparatelyidentifiedasdeterminantsofeffectivetaxation (Besley&Persson,

3WithinlaborinOECDcountries, Eggeretal.(2019) findthatglobalizationinthepost-1994eraledtoa reductioninincometaxesforthetop1%ofworkersandincreasedincometaxesformiddle-classworkers.

4Wecomplementotherworkineconomichistoryontaxation (includingCogneau,Dupraz,Knebelmann,& Mesplé-Somps, 2021), byprovidinglong-runmeasuresoffactoreffectivetaxrates.

5Thetheoreticalliteraturehasfocusedontrade’simpactontheoptimalindirecttaxmixbetweenborder andconsumptiontaxesindevelopingcountries(e.g.EmranandStiglitz,2005)andmainlyabstractedfrom directtaxes. BenzartiandTazhitdinova(2021) studytheimpactofindirecttaxesontradeflows.

2014;Bestetal., 2021).6 Wecontributebylinkingthesetwobodiesofworkanddirectly studyingtrade’simpactsondomestictaxbasesatthecountry,sectorandfirmlevel.

Byincorporatingdomestictaxbases,wecancomprehensivelystudythetotaltaxrevenueimpactsofglobalization.Previousstudiesontrade’srevenueimpactindeveloping countrieshaveproducedmixedfindings,possiblyduetodifferencesinsample,methods andtaxbasefocus (includingBaunsgaard&Keen, 2009;Buettner&Madzharova, 2018; Cagé&Gadenne, 2018). Wecontributebyimplementingmultipleidentificationstrategiesinthelargestsampletodateandfindthattrade’simpactsondomestictaxbasesare sufficientlylargethatopennessincreasestotaltaxrevenue(asa%ofGDP).

Theseimpactsoftradearemediatedbythetaxcapacitymechanism,whichisrooted intwodistinctinsightsfromthetradeandthepublicfinanceliteratures.First,alarge classofmodelspredictsthattradeleadstotheexpansionoflargefirmsrelativetosmall firms (Mrázová&Neary, 2018); forempiricalevidence,see Bernard,Jensen,Redding, andSchott(2007). Second,indevelopingcountriessmallfirmsaremainlyinformal, andeffectivetaxationincreaseswithfirmsize(measuredasfirmrevenue)7;thispositive gradientarisesbecauseeffectivetaxcollectionishigherinlargerfirmsandcorporations duetotheirvisibility,complexproductionstructures,andemploymentofmanyworkers (Almunia,Hjort,etal., 2023;Waseem, 2020). Theresultinginformationtrailsimprove enforcement (Naritomi, 2019;Pomeranz, 2015), thoughwithlimits (Carillo,Pomeranz,& Singhal, 2017).8 Thepositivesize-gradientalsoarisesbecausethetaxcodeindeveloping countriesoftenleadstohigherstatutorytaxburdensforlargerfirmsandcorporations (R. Kumar&James, 2022): Bachas,Brockmeyer,Dom,andSemelet(2023) findapositivesizestatutorytaxgradientamongcorporationsin15countries.Ourmechanismismotivated by AbbasandKlemm(2013), whohypothesizethatthecorporatesectorexpansioncould explainwhythereductioninstatutorycorporatetaxburdensindevelopingcountrieshas notledtoareductioninCITrevenue(%ofGDP).9 Themechanismalsorelatestostudiesin high-incomecountriesthatlinkCITcollectiontothecorporatesector’sstatutoryburden, output-shareandprofitability (Clausing, 2007;Griffith&Miller, 2014;Sørensen, 2007).

Wefocusonamechanismbasedonfirmsize,butmanylinksbetweentrade,firm structure,andtaxationremaintobeexplored (Atkin&Khandelwal, 2020;Parenti, 2018).

6Ourresults,whichfocusonthecorporateoutput-share,arecompatiblewithfindingsfromtradeformalizationstudies,whichinsteadfocusontheshareofformalworkersorfirms(Section 6).

7Seealso KopczukandSlemrod(2006), Kleven,Knudsen,Kreiner,Pedersen,andSaez(2011), LaPortaand Shleifer(2014), Bachas,Fattal,andJensen(2019) and Bestetal.(2021).

8IndevelopedcountriesincludingtheUS,thelargecorporatesectorisconsideredanimportantdeterminant ofeffectivetaxcollection (Kleven,Kreiner,&Saez, 2016;Slemrod&Velayudhan, 2018).

9Seealso Quinn(1997), M.M.S.KumarandQuinn(2012) and Abramovsky,Klemm,andPhillips(2014).

3ConstructionofEffectiveTaxRates

Thissectionpresentsanewdatabaseofeffectivetaxrates(ETR)onlaborandcapital, whichcovers154countries,startingin1965whenpossible,until2018.Wefirstoutlinethe conceptualframeworktobuild ETR,thenpresentthedatasources,andfinallydiscuss thesamplecoverage.FurtherdetailsareinAppendix B

3.1Methodology

Effectivetaxrates Wecomputemacroeconomiceffectivetaxratesfollowingthemethodologyof Mendoza,Razin,andTesar(1994). Theeffectivetaxrateonlabor,denoted ETRL, isthetotalamountoftaxeseffectivelycollectedonlabordividedbytotallaborincomein theeconomy;similarlyforcapital,denoted ETRK :

Toconstructthenumerators,eachtypeoftaxrevenueisassignedtolabororcapital:

where λj istheallocationtolaborofeachtype j oftax τj .Typesoftaxes j followtheOECD Revenueclassification.Weallocatetaxesasfollows:(1)corporateincometaxes,wealth taxes,andpropertytaxesareallocatedtocapital;(2)payrolltaxesandsocialsecurity paymentsareallocatedtolabor;(3)personalincometaxes(PIT)areallocatedpartlyto laborandpartlytocapital,inacountry-timespecificmanner(detailsbelow).Indirect taxesareneitherassignedtolabornortocapital(butanalyzeddirectlyinSection 5.3). Table B2 providesadetailedallocationsummary.

Toconstructthedenominators,wedecomposenetdomesticproductasfollows:

Laborincome YL equalscompensationofemployees(CE)plusashare ϕ ofmixedincome (operatingsurplusofprivateunincorporatedenterprises, OSPUE ).Capitalincome YK equalstheremainingshare (1 ϕ) ofmixedincome,pluscorporatefirms’profitsnetof

depreciation(operatingsurplusofcorporations, OSCORP ),plusactualandimputedrental income(operatingsurplusofhouseholds, OSHH ).10

Wealsomeasuretheeffectivetaxrateoncorporateprofits, ETRK C ,astheratioof corporateincometaxestocorporateprofits.Thisisanaverageeffectivetaxrateatthe corporatesectorlevel;inSection 6,weanalyzethefirm-levelcorporateeffectivetaxrate.

Thesemacroeconomic ETRsrelyonseveralconventionsandassumptions (seeCarey &Rabesona, 2004). First,asisdoneintheliterature,theydonotfactorineconomic incidenceinthattheeconomiccostoftaxesisnot“shifted”fromonefactorofproduction toanother:alllabortaxesareallocatedtolaborandallcapitaltaxesareallocatedtocapital. Second,thetaxrevenuestreamsneedtobecomparabletotheirmacroeconomictaxbases measuredinnationalaccounts.Thisgeneratestwokeychallengesforour ETRs:(i)inthe numerator,whatshareofpersonalincometaxrevenuestoallocatetocapitalversuslabor; and(ii)inthedenominator,whatshareofmixedincometoallocatetocapitalversuslabor. Weoutlinebelowourbenchmarkassumptions(detaileddiscussionisinAppendix B.2). Allocationofpersonalincometaxes(PIT) Themainempiricaldifficultyinassigning taxestolaborandcapitalconcernstheallocationofPIT.Anaiveprocedureallocates70% ofthePITtolaborand30%tocapital,roughlymatchingthelaborandcapitalshares ofdomesticproduct.Inpractice,however,recentworkhighlightsthatnotalllaborand capitalincomeissubjecttoPIT,sincenotallindividualsarerequiredtofilePIT,and exemptionsapplytosomeincometypes (Jensen, 2022). Exemptionsforcapital(e.g., imputedhousingrents,undistributedprofits)aretypicallylargerthanforlabor(e.g., pensioncontributions).Further,laborandcapitalincomemightnotfacethesametax rate:dual-incometaxsystemstaxlaborincomewithprogressiveratesbutcapitalincome withflatrates.IntheUS, Piketty,Saez,andZucman(2018) usedetailedtaxandnational accountsdatatomeasurethat75%oflaborincomeissubjecttoPIT,versus33%ofcapital income.Thissuggestsallocating15%ofPITtocapitaland85%tolabor.11

Startingfromthisbaselinewhere15%ofPITrevenuesderivefromcapital,weperform twocountry-yearadjustments:(i)weraisecapitalrevenuesforcountry-yearswithahigh PITexemptionthresholdintheincomedistribution (Jensen, 2022); (ii)weloweritin country-yearswheredividendsfacelowertaxesthanwages.Theresultingcapitalshare ofPITrevenuevariesbetween7%and32%acrosscountry-years.Overtime,thissharefalls

10Wedecomposenetdomesticproduct(NDP),whichsubtractsconsumptionoffixedcapitalfromgross domesticproduct(GDP).NDPislowerthanGDP,by10%onaverage.Weexcludecapitaldepreciation sinceitdoesnotaccruetoanyfactorofproductionandisusuallytax-exempt.Factorincomesalsoexclude indirecttaxes(whicharealsoexcludedinthenumeratorof ETR).

11If75%oflaborincomeistaxableandlaborincomeis70%ofnationalincome(resp.33%and30%for capitalincome),then 75% × 70%/(75% × 70%+33% × 30%)=84% ofthePITislaborincome.

fromaglobalaverageof19%in1965to14%in2018,duetoareductioninPITexemption thresholdsandincreasedprevalenceofdualtaxsystems.

Intheabsenceofdetailedtaxrecordsineverycountryandyear,theseadjustments provideanimperfectapproximationofthetruecapitalshareofPIT.Wethereforeimplementtwosimplerobustnesscheckswheretheshareallocatedtocapitalisfixedovertime ateither0%or30%,representinglowandhigh-endscenarios.

Thelaborshareofmixedincome Thelaborshareofmixedincome(unincorporated enterprises)ishardtomeasure.12 Forourbenchmarkseriesweassume ϕ =75%,i.e., 25% ofmixedincomeisconsideredcapitalincome.13 Intheabsenceofaconsensusover alternativesthisassumptionhastheadvantageofbeingtransparent,thoughfactorshares areunlikelyinpracticetoeverywherebetimeandcountry-invariant.Wethereforeimplementtworobustnesschecks,whichcreatetimeandyearvariationin ϕ.Thefirstmethod, basedon ILO(2019), usesmicro-datatoestimatethecountry-specificlaborincomeofselfemployedbasedontheobservablecharacteristicsoftheseworkersandtheircomparison withemployees.14 Second,weassignto ϕ theobservedcountry-yearlaborshareofthe corporatesector (asinGollin, 2002).

Theexact ETR formulaswhichincludetheaboveadjustmentsareinAppendix B.2. UsefulnessandlimitationsofETR Sincenationalaccountstatisticsarecompiledfollowingharmonizedguidelines, ETRsareconceptuallycomparableovertimeandacross countries,thoughthedatalimitationsdescribedaboveshouldbekeptinmind.Byrelying ontaxesactuallycollected,the ETRsincorporatetaxavoidanceandevasionbehavioras wellasthenetpasteffectsofalltaxpolicies,includingrates,exemptionsandcredits. Thisisparticularlyrelevantinadevelopmentcontext,whereduetowidespreadevasion, knowledgeofstatutorytaxrulesonlyprovidesapartialpictureofeffectivetaxburdens.

The ETRsarebackward-lookingmeasuresthatcomprehensivelycapturehowmuch capitalandlaborhaveeffectivelypaidintaxes.Theyarehelpfulforthreereasons.First, knowinghowmuchrevenuesareeffectivelycollectedfromeachfactorisimportantwhen governmentsfacefiscalpressure (Besley&Persson, 2014): thisischaracteristicofmost

12TheUN’snationalaccountsframeworkoutlinesthecombinationofmultiplemethodstoovercomechallengesofmeasuringthe level ofmixedincomeineconomieswithwidespreadinformality.Whileinformationonthemethodsusedisnotavailableonacountry-yearbasis,aninspectionofthepublished frameworkssuggestsnochangeinmethodologiesformixedincomeovertime.

13Thisisbelowthe30%usedinDistributionalNationalAccounts(DINA)guidelines (Blanchet,Chancel, Flores,&Morgan,2021),butsincetheglobalaverageofthecorporatesector’scapitalshareis27%,assuming alowercapitalshareforunincorporatedenterprisesseemsreasonable (seeGuerriero, 2019).

14DetailsinAppendix B.2.Achallengewiththismethodisthatitcancreateimplausiblylargeestimatesof thelevelofmixedincomecomparedtotheirvaluesinnationalaccounts.Weimplementanadjustmentto helpwiththislimitation,butforthisreasonwechoosetouse ILO(2019) onlyforrobustness.

developingcountries,wherepotentialrevenuelossesorgainsisakeypolicydeterminant. Second,thelevelofthe ETR anditsdeviationfromastatutoryrateisfrequentlyaninput intopolicy-makingtounderstandthesizeoftaxgaps(e.g.therecentfocusonthefirmlevel ETR intheglobalminimumtaxagreements).Finally,thetaxburdenleviedoneach factorisanimportantstartingpointtodeterminetheeconomicincidenceofataxsystem.

Alimitationofmacroeconomic ETRsisthattheyareimpactedbyboththetaxcode andeconomicchanges.Thus,studying ETRsismosthelpfullydoneincombinationwith analyzingitsmechanisms,whichwefocusoninSection 6.Related,weemphasizethat the ETR shouldnotbeinterpretedasaproxyforthestatutorytaxburden.Animportant complementarybodyofworkcarefullymeasureslegaltaxburdens (Devereux&Griffith, 1999), byconstructingforward-lookingaveragetaxratesoncapitalbasedonthesimulated presentvalueofreturnsandcostsofanewinvestment.Drivenbydifferingobjectives,the backward-lookingandforward-lookingmeasuresarerelated,yetdistinct.15

3.2Datasources

3.2.1Nationalaccounts

Tomeasurefactorincomesfor154countriessince1965whenpossible,wecreateapanel ofnationalaccountsusingdatafromtheSystemofNationalAccounts(SNA)producedby theUnitedNations.Wefirstusethe2008SNAonlinerepositorythathasglobalcoverage forrecentdecades.Inturn,theUNStatisticsDivisionprovideduswithaccesstothe1968 SNAofflinedatawhichcovershistoricaldatafromthe1960sand1970s.Tothebestof ourknowledge,ourpaperisthefirsttoharmonizeandintegratethe2008-SNAand1968SNAdatasets.16 Estimatingfactorincomesrequiresinformationonallthecomponentsof nationalincome(equation 3).Wheneverwehavenationalincomeforacountry-yearbut informationonacomponentismissing,weattempttorecoveritwithinformationfrom thesecondSNAdataset,aswellasusingnationalaccountingidentitieswithnon-missing valuesfortheotherincomecomponents.Intheremainingcases,weimputecomponent valuesfollowingDINAguidelines (Blanchetetal., 2021) (detailsinAppendix B.1).

3.2.2Taxrevenue

Weconstructanewtaxrevenuedatasetthatdisaggregatestaxesbytypefollowingthe OECDRevenueStatisticsclassificationoftaxes.Ourdatabaseincludesalltaxes—onper-

15Thisisparticularlythecasefor ETR K C :see supplementaryappendix foradetaileddiscussion.Our measureof ETR K C alsorelatestotheCIT-efficiencymeasureby IMF(2014). Inthe supp.apppendix we findthatCIT-efficiencymeasuredwithourdataintherelevantsamplematcheswellthe IMF(2014) series. 16Relativetorecentwork (includingGuerriero, 2019;Karabarbounis&Neiman, 2014), ourdataexpands coverageinspaceandtime,mainlytodevelopingcountries,andsystematicallyattemptstomeasurefactor incomesfortotaldomesticoutput(vs.onlyforthecorporatesector).

sonalandcorporateincome,socialsecurityandpayroll,property,wealthandinheritance, consumptionandinternationaltrade—atalllevelsofgovernment.Weensureasystematic separationofincometaxesintopersonalandcorporateincome.Wecollectnewarchival dataandintegrateitwithexistingdatasources.

Whenavailable,OECDRevenueStatisticsdata(link)isthepreferredsource,asitcovers alltypesoftaxrevenuesandgoesbackto1965forOECDcountries.Itaccountsfor2,875 country-yearobservations(42.3%ofthesample).Itsdrawbackisitslimitedcoverage ofnon-OECDcountries,asitcovers93countriesintotalandonlycoversdeveloping countriesmorerecently.WeadddatafromICTD (link).ICTDincludesmostdeveloping countries,withcoveragethatstartsinthe1980s.ICTDsometimescombinespersonaland corporateincometaxes,andsometimeslackssocialsecurity.ICTDadds1,246countryyearobservations(18.3%ofthesample).

Tocomplementtheseexistingsources,weconductedarchivaldatacollectiontodigitize recordsfromgovernmentbudgetsandnationalstatisticalyearbooks.Thisadds2,011new country-yearobservations.17 Wesupplementedthesearchivalrecordswithcountries’ onlinepublications,andofflinedatafromtheIMFGovernmentFinanceStatistics(19721989).Intotal,thisdatacollectionadds2,678observations(39.4%ofthesample).

Buildingadatasetbasedonnewlydigitizedhistoricalsourcesnecessarilyrequires makinganumberofdecisions.Toincreasethecredibilityofourdata,wefollowfour guidingprinciples.First,weseektobuildlonghistoricaltime-seriesthatoverlapinyears withexistingsources.Weaimtoonlyusetwodatasourcespercountry,butusethe overlappingyearsbetweenmultiplesourcestocorroboratethattheyarecomparablein levelsoftaxrevenueandtypesoftaxesinplace.18 Forthisreason,aswitchindatasource rarelyleadstoasignificantchangeintrend.Second,forthehistoricalperiodswithout overlapwithexistingdata,wecorroboratethelevelsoftaxtoGDPwithacademicand policystudies.Third,wedrawonhistoricalstudiestoverifythatlargechangesinrevenues collectedreflectpolicy,economicorpoliticalchangesratherthandataartifacts.Fourth, weaimtobeconservativeandexcludecountriesintimeperiodswhereconcernsexist aboutdataquality,duetotheeconomicandpoliticalcontext.

Tohelpassessourapproach,the supplementaryappendix providesadditionalmaterial.Weprovideatablewhichoutlines,ineachofthe154countries,themainconsiderationsandourchoicesrelatingtothefourguidingprinciples.Thetableemphasizesthe uncertaintysurroundingspecificcountriesandtimeperiods,andflagsinstanceswhere

17ThearchiveswereaccessedintheGovernmentSectionoftheLamontLibrary(websitelink).

18OECDisthepreferredstartingpointandarchivaldataisinitiallysecondinprioritysinceitoftendisaggregatestaxtypesandgoesbackfarintime,butwerevisethisbasedonthesourcethatbestmatches theOECDdata.The supplementaryappendix summarizesthedatasourcesusedforeachcountry.

thedataappearsworthyofinclusionbutshouldbeinterpretedwithcaution(allourmain resultsareunchangedifweexcludetheseinstances).Moreover,weprovidein-depthcountrycase-studieswithdirectlinkstotheinitialarchivalsources;thecase-studiescurrently coverallcountrieswithmorethan15millioninhabitantsbutwillultimatelyexpandto coverall154countries.Weinvitecommentsfromresearcherstohelpimprovetheaccuracy oftheseriesaswecontinuouslyupdatethedata.

3.3Datacoverageofeffectivetaxrates

Thefinal ETR samplecontains6,799country-yearobservationsin154countries(Figure A1).Thenumberofcountriesstartsat78in1965andgrowsto110by1975(dueto independenceorcountrycreation).Thekeyjumpincoverage—from117to148— correspondstotheentryofex-communistcountriesin1994,includingChinawhenit arguablybuiltamoderntaxsystem(Appendix B.1).Thedataiseffectivelycomposedof twoquasi-balancedpanels.Thefirstcovers1965-1993andexcludescommunistregimes, accountingfor85-90%ofworldGDP.Thesecondcovers1994-2018andincludesformer communistcountries,accountingfor97-98%ofworldGDP.Figure A1 showscoverageby developmentlevel.WeusetheWorldBankincomeclassificationin2018,classifyinglow andmiddle-incomecountries(LMICs)asdevelopingcountriesandhigh-incomecountries (HICs)asdevelopedcountries.WereferinterchangeablytoLMICsasdevelopingcountries andHICsasdevelopedcountries.Oursamplecontains5,144observationsinLMICsand 1,655observationsinHICs.

Comparisonwithexistingdatasets Ourdatabasecomplementsprevious ETR series byexpandingcoveragetoLMICs.Table B3 summarizesthecoverageofexisting ETR series,whichfocusonHICs (Carey&Rabesona, 2004;Kostarakos&Varthalitis, 2020; McDaniel, 2007;Mendozaetal., 1994). Ourbenchmark ETRsrelyonspecificchoices: Table B3 summarizesthemethodologicaldifferenceswithexisting ETR series,which relatemainlytoallocatingcapitaltobothmixedincomeandPIT.19 Thealternativechoices arecoveredbytherobustnesschecksofSection 3.1,whichareimplementedinSection 4.2.

4StylizedFactsonGlobalTaxationTrends

4.1Evolutionofeffectivetaxratesoncapitalandlabor

Figure 2 documentstheevolutionofeffectivetaxratesoncapitalandlaborfrom1965to 2018.Aggregatesaredollar-weighted,i.e.,theglobaleffectivetaxrateoncapitalequals worldwidecapitaltaxrevenuesdividedbyworldwidecapitalincome.Theseseriescan

19Acomprehensivediscussionofthemethodologicaldifferencesisprovidedinthe supp.appendix.

thusbeinterpretedastheaveragetaxrateonadollarofcapitalincomederivedfrom owninganassetrepresentativeoftheworld’scapitalstock.Thetoppanelshowsglobal trendsandthebottompanelsseparateHICsandLMICs.

Globally,effectivetaxratesonlaborandcapitalconvergedbetween1965and2018,due toariseinlabortaxationandadropincapitaltaxation.Theglobal ETRL rosefrom16% inthemid-1960sto25%inthelate2010s,while ETRK fellfrom32%to26%.

Theglobaltrendsmaskheterogeneitybydevelopmentlevels.Whilelabortaxationrose everywhere,thedeclineincapitaltaxationonlyoccurredinHICs:theeffectivecapitaltax ratefellfrom38-39%to32-33%betweenthelate1960sandlate2010s,fueledbyalarge reductionineffectivecorporatetaxrates,whichfellfrom27%to19%.Incontrast,starting fromalowlevel, ETRK increasedinLMICs,withtherisehappeningentirelysincethe beginningofthe1990s. ETRK startedat10%inthemid-1960sandwasatthesamelevel in1989;inbetween,therewasariseanddeclineinthelate1970s,butthistemporary changewasfullydrivenbyresource-richcountries(Figure 4).From10%in1989, ETRK sawasustainedincreaseoverthenexttwodecadeswhichreached18%in2018.Therise incapitaltaxationispartlydrivenbyhighereffectivetaxationinthecorporatesector:the effectivecorporatetaxraterosefrom12%to20%between1989and2018inLMICs.20

4.2Theriseofcapitaltaxationindevelopingcountries

Theseculardeclinein ETRK inHICshasbeendocumentedbefore (Dyreng,Hanlon, Maydew,&Thornock, 2017;Garcia-Bernardo,Janský,&Tørsløv, 2022), buttherisein ETRK inLMICsstartingatthebeginningofthe1990sisnovel.Wethereforeneedto establishthatthisresultisrobusttotheassumptionsweusedtoconstructthe ETR series.

The ETR seriesdependsonfourmainmethodologicaldecisions:(1)howtoassign PITrevenuetocapitalvslabor;(2)howtoallocatemixedincometocapitalvslabor;(3) balancedvs.unbalancedpanel;(4)weightstoaggregatecountries.Ourbenchmarkseries: (1)assignsPITtocapitalvs.laborforeachcountry-yearusingdataonPITexemption thresholdsandthetaxtreatmentofdividendsrelativetowages;(2)allocatesafixed25% ofmixedincometocapital;(3)consistsoftwoquasi-balancedpanelsbeforeandafter1994 (whenChina,Russiaandotherformercommandeconomiesenterthesample);and(4) weighscountriesbytheirshareofworldwidefactorincomeineachyear.Weassesshow resultschangewhenvaryingone,several,orallofthesechoicesatthesametime.

20Figure A2 showsthatbothcorporatetaxrevenuesandcorporateprofitsincreasedsince1989buttheformer outpacedthelatter,causing ETR K C torise.Corporateprofitsandtaxrevenuearethelargestcomponents thatdeterminechangesin ETRK .Smallercontributionsto ETRK ’srisecomefromthedeclineinmixedincome,andthesteadyincreaseinpropertyandwealthtaxes,whichoutpacedincomefromrents,albeit startingfromaverylowlevel(0.3%ofNDPin1989).

Figure 3 investigatestherobustnessofthe ETRK trendinLMICs.21 Panel(a)varies theallocationofpersonalincometax(PIT)revenue.Ourbenchmarkfollowsadata-driven country-yearassignment;insteadweconsidertwosimplerscenarioswheretheshare allocatedtocapitalisfixed,ateither0%or30%(lowandhigh-endscenarios).Dueto highPITexemptionthresholdsinLMICs,thebenchmarkcountry-specificassignmentis closerinlevelstothe30%thantothe0%scenario.Thoughthecapitalshareallocatedto PITslightlychangesovertime(Section 3.1),thetime-invariantrobustnessseriestrackthe trendsinthebenchmarkseriesclosely.ThisisbecausethePITremainslimitedinLMICs, suchthatitssplitintolaborversuscapitalisofminorconsequence.

Panel(b)variestheassignmentoffactorsharesinmixedincome.Weimplementtwo robustnesschecks,creatingmixedincomelaborsharesthatvaryatthecountry-levelbased onthe ILO(2019) method,andatthecountry-yearlevelbasedontheobservedcorporate laborshare.Bothalternativeseriesareverysimilartothebenchmark.

Panel(c)quantifiestheeffectofcountryentryintothepanel.Inourbenchmark, China,Russia,andotherformercommandeconomiesenterin1994.Inthisrobustness, webalancethepanelbyimputingmissingobservationsbetween1965and1993;weuse theobserved ETRK valueforthatcountryin1994andthetrendsin ETRK observedfor otherLMICsin1965-1993.Theimputationraises ETRK between1965and1993,because Russiahadbothahigh ETRK andahighweightwhenenteringthesamplein1994.

Panel(d)aggregatescountriesusingnetdomesticproduct(NDP),insteadofcapital incomeweights.TheNDPweightsareeithertime-varyingorfixedin2010.These alternativeweightingproceduressuggestaslightlyhigherincreasein ETRK overtime.

Finally,panel(e)plotsall54combinationsofthefourmethodologicalchoices.Therise in ETRK inLMICsbetween1989and2018isclearlyapparentineachofthe54series.How wideistherangeofincreasesandhowdoesourbenchmarkseriescompare?Computing the1989-2018changeinthe54series,weobtainafairlytightrangeof ETRK increases, between6.4pptand10.3ppt.Ourbenchmarkisat8.7ppt,whichisclosetothemean increaseof9.2ppt;therearelargerincreasesthanourbenchmarkin43seriesandsmaller increasesin10.22 Ourbenchmarkseriescorrespondstoan87%increaseintheeffectivetax rateoncapitalinLMICssince1989,reflectingboththestronggrowthandlowbaseline.

Comparisonwithpreviousstudies Pre-existing ETR seriesmainlycoverHICs,which limitsthecomparisontooursample.InHICs,ourbenchmark ETR trendsarecomparable

21Therobustnessfor ETRL inLMICs,and ETRL and ETRK inHICsareshowninthe supp.appendix

22Setting1989asthebaseyearispartlyarbitrary,butitallowsustofixastartinglevelfor ETRsimmediately beforetheperiodofstrongtradeliberalizationinLMICs.Ifweinsteadcomputethechangein ETRK between2018andthelowestpointinagivenseries,therangeofchangesis6.8-11.3pptacrossthe54series, withameanat9.6pptandourbenchmarkat9.4ppt.

topreviousstudies,butthelevelsdifferby16.5%onaverage(Figure B1).Thisdifference isprimarilyduetomethodologicalassumptionsabouttheallocationofcapitaltomixed incomeandPIT(Table B3).However,thealternativemethodologiesfromthepre-existing seriesarecontainedwithintherangeof ETR trendsproducedbyourrobustnesschecks. InHICs,thatrangeof ETRK trendsisindeedwide(duetothequantitativeimportance ofthePIT; ETR seriesin supp.appendix).However,therangeof ETRK trendsin LMICsiscomparativelytighter(Figure 3);thisisbecausetherisein ETRK inLMICsis primarilydrivenbythecorporatesector(Figure A2),whichisnotstronglyaffectedbythe methodologicaldifferencesbetweenourstudyandpre-existingstudies.

4.3Wherehascapitaltaxationrisen?

Figure 4 showsthe ETRK seriesforsubsamplesofcountries.Panel(a)plots ETRK series forthemostpopulousLMICs:Brazil,China,IndiaandIndonesia.Alldisplayamarked ETRK riseovertime.Startingin1989(1994forChina)until2018, ETRK rosefrom7%to 27%inBrazil,6%to24%inChina,5%to12%inIndia,and9%to15%inIndonesia.

China’sweightandfast-risingcapitaltaxationimplythatitplaysakeyroleinthe aggregate ETRK trendinLMICs.Panel(b)showsthat,whenexcludingChina,therisein ETRK ishalfaslarge(from10%to15%)andamoresignificantpartoftheriseoccurred earlierinthe1990s.Panel(c)showsthatoil-richcountries,measuredasderivingmore than7%ofGDPinoilin2018,havebeenonacompletelydistinctpath.Reflectingtheoil commodityshocks,their ETRK roseinthe1970sbutfellinthe1980s,andhavestayed flatsince.Excludingoil-richcountriesyieldsamorepronounced ETRK rise,from9%in 1989to21%in2018,andaflat ETRK seriesfrom1965to1989.IfweexcludebothChina andoil-richcountries,weobservearisein ETRK from9%in1989to17%in2018,which issimilarinmagnitudetothebenchmarkseries.

Panel(d)revealsthat,amongnon-oil-richcountries,the ETRK riseisstrongerinlarge LMICs,definedasthe19countrieswithapopulationabove40millionin2018.Even whenexcludingChina,the ETRK oftheother18mostpopulatedcountriesrosefrom9% to18%between1989and2018;insmallercountries, ETRK rosefrom10to14%overthe sameperiod.The ETRK hasrisenbymorethan5percentagepointsin13ofthe19largest LMICssince1989,andhasonlyfalleninonecountry(Russia).23

Inshort,theriseineffectivecapitaltaxesismorepronouncedinlargercountries, includingChina,butisageneralpatternindevelopingcountries,exceptforoil-richones.

23The supplementaryappendix showstheindividualcountries’ ETRK and ETRL timeseries.

4.4Suggestiveevidencefortheroleofglobalization

Wesawthat ETRK fellinHICsbutroseinLMICs.Importantly,theriseinLMICsstarts intheearly1990s,whichcoincideswiththeonsetofthe"hyper-globalization"period thatcouldapriorihavemadecapitalmoremobileandhardertotax.24 Instead,could tradeglobalizationhavecaused ETRK toriseinLMICs?Herewetakeafirstpassat investigatingthisquestion.Wecreate5-yeargrowthrateswithincountriesintradeand ETRs.Weplotbinnedscattersof ETR againsttradeopenness(measuredastheshareof importsandexportsinNDP),afterresidualizingallvariablesagainstyearfixedeffects.

Figure 5 depictsthesewithin-countryassociations,whichconditiononglobaltimetrends. Mirroringtheheterogeneityinlong-runtrends,weobservedifferencesbydevelopment levelintheassociationbetweentradeand ETRK :opennessisassociatedwithincreases in ETRK inLMICs,butwithdecreasesin ETRK inHICs.25 Insum,fromaglobaland historicalperspective,thecorrelationalevidencesuggeststhattrademayhavecontributed tothenewlydocumentedrisein ETRK indevelopingcountries.

Naturally,LMICshaveundergonesignificantdevelopmentsincethe1960sandthis growthislikelytoalsohavecontributedtothelong-runrisein ETRK .Inthe supplementaryappendix,wefindthattheassociationsinFigure 5 holdinLMICswhencontrolling forGDPpercapitagrowth.Thiscorrelationalevidence,combinedwiththeobservation thatwhileglobalizationisamajorprocessinLMICs,itsrevenueimpactsarestillnotestablished(Section 1),motivateustoinvestigatetradeasadeterminantof ETR andstudy itsmechanisms.

5TradeGlobalizationandCapitalTaxation

Inthissection,weimplementtwodistinctresearchdesignstoinvestigatetheimpactof tradeopennessoncapitalandlabortaxationindevelopingcountries.

5.1Event-studiesfortradeliberalization

5.1.1Empiricaldesign

Inthefirstdesign,weimplementeventstudiesoftradeliberalizationpolicyeventsin keydevelopingcountries.Todiscernsharpbreaksfromtrendsinouroutcomes,our selectioncriteriawastoselecteventsthatcausedlargetradebarrierreductionsandwhich

24IndividualtrendsinthefourlargestLMICs(Figure 4)alsosuggestanassociationbetweenliberalization episodesandanuptickin ETRK (Brazilin1988;Chinain2001;Indiain1991;Indonesiainthemid-1980s).

25The supplementaryappendix furthershowsthatearlyglobalizedLMICssawtradeand ETRK risein tandempriortothe1990sandstagnatethereafter.Bycontrast,LMICswhichparticipatedinthesecond waveofglobalizationpost-1990sawariseintradeand ETRK inthe1990-2018period.

havebeenstudiedintheliterature.Thisledustoselectthesixeventsfromthereview papersby GoldbergandPavcnik(2007, 2016) (Colombiain1985,Mexicoin1985,Brazilin 1988,Argentinain1989,Indiain1991,Vietnamin2001),andaddthewell-knownevent ofChina’saccessiontoWTOin2001 (Brandtetal., 2017). Theseliberalizationevents ledtolargereductionsintariffs:from59%to15%inBrazil;80%to39%inIndia;and, 48%to20%inChina.Wecanrelyonpre-existingnarrativeanalysestodiscussthreatsto identificationandinterpretationofresults.26 Appendix C.1 providesmoredetailsonour selectioncriteriaandtheliberalizationevents.

Foreachoftheseventreatedcountriesandoutcomes,weconstructasyntheticcontrol country,asaweightedaverageoverthedonorpoolofnever-treatedcountries(Abadie, Diamond&Hainmueller,2010).27 Wematchonthelevelofeachoutcomeinthe10years priortotheevent,whileminimizingthemeansquaredpredictionerrorbetweentheeventcountryandthesyntheticcontrol.28 Weplottheaveragelevelsoftheoutcomefortreated andsyntheticcontrolcountriesbyrelativetimetotheevent.Moreover,weestimatethe event-studymodelin10yearsbothbeforeandaftertheevents:

whereweincludefixedeffectsforevent-time, θt,country κc,andcalendaryear, πYear(t) (thelattercontrolforshocksthatcorrelatewitheventsclusteredincalendartime). Dc is adummyequaltooneifcountry c istreated.Thecoefficient βe capturesthedifference betweentreatedandsyntheticcontrolcountriesineventtime e,relativetothepre-reform year e = 1 (omittedperiod).Sinceinferencebasedonsmallsamplesischallenging,we plot95%confidenceboundsusingthewildbootstrap,clusteredatthecountryeventlevel. InTable A1 weestimatethesimpledifference-in-differences,whichcapturestheaverage treatmenteffectinthe10yearspost-liberalization,andtheimputedtreatmenteffectbased on Borusyak,Jaravel,andSpiess(2021), whichaddresseschallengesfromtwo-wayfixed effectsandheterogeneousevent-times.

5.1.2Event-studyresults

Figure 6 displaystheeventstudiesinlevels(left-handpanels)andthedynamicregression coefficients(right-handpanels).Thetoppanelsshowthat,asexpected,tradeopenness

26Thereductionsintradebarriersaresometimesimplementedoverseveralyears.Tobeconservative,we focusontheearlieststartyearforeacheventasdefinedinpublishedstudies.

27Foreachcountry-event,wecanincludeeventually-treatedcountriesinthedonor-pool(excludingthose withtreatmentwithin5yearsoftheevent);theresults,availableuponrequest,aresimilar.

28The supp.appendix liststhecountriesincludedinthesyntheticcontrolforeacheventandeachoutcome.

risesintheyearspost-eventby10percentagepoints,anditstrendchangesinpost-reform yearscomparedtopre-liberalizationyears.29 Themiddlepanelsshowthat ETRK followed stablepre-trendsandsharplyrisespost-liberalization,by4to5percentagepoints.The bottompanelsshow ETRL alsorose,butonlyby2percentagepoints.Despitethesmall samplesize,thedynamicpost-treatmentcoefficientsforeachperiodareoftensignificant atthe5%level.Thep-valuesforthejointsignificanceofallpost-reformdummiesare wellbelow5%.Table A1,PanelA,reportstheDiDresults,whicharemarginallymore significantwhenestimatedfromimputedtreatmenteffects.PanelBshowsthatresultsare comparablewhenwejointlymatchonalloutcomesforeachcountry-event.

Theidentifyingassumptionisthattherearenochangesinconfoundingdeterminants of ETR thatcoincidewiththeliberalizationevents.Thebreaksfromstablepre-trends implythatconfoundingchangeswouldhavetosharplycoincidewiththeeventonset. Narrativeanalysesofthetimingforeachevent(Appendix C.1)donotsuggestobvious concurrentchanges.Moreover,usingdatafrom WacziargandWallack(2004), weverify thatothercross-borderreforms(e.g.capitalliberalization)ordomesticreforms(e.g.privatization)donotoccurinthesameyearasthetradeevents.30 However,reformssometimes occurafewyearsafter:forexample,MexicojoinedNAFTAandremovedcapitalinflow restrictions,ArgentinaandBraziljoinedMERCOSUR,andIndialiberalizeditsFDIrules (Appendix C.1).Thesereformsoccurredseveralyearspost-tradeliberalization,but ETRs sharplyriseintheimmediatepost-eventyears.Thisdiscussionhighlightsthatthecausal interpretationoftrade-centeredmacroeconomicreformsrequirescaution.Aplausible interpretationisthattheshort-runrisein ETRswithsharpbreaksfromstablepre-trends reflectstheimpactoftradereforms,butthatthemedium-runcoefficientsalsoreflectthe impactsofadditional,mainlycross-border,reforms.

Ourresultsarebasedona(small)sampleofliberalizationeventsthatsatisfiedspecific criteria.InAppendix C.3,westudytherobustnesstousingverydifferentselection criteriafortradeliberalization.Specifically,were-estimatetheevent-studyusingthe68 liberalizationeventsinLMICsfrom WacziargandWelch(2008). Wefindverysimilar impactsoftradeon ETR usingthisalternativeandexpandedsetofliberalizationevents.

Wefurtherprobetheidentificationandrobustnessofourresults.First,giventhe limitednumberofliberalizationevents,weinvestigateiftheaverageeffectsareinfluenced byoneparticularevent.Removingonetreatedcountryatatime,wefindthedynamic treatmenteffectsforallsubsetsofeventsaresimilartothefullsample(supp.appendix).

29Theabsenceofapre-reformdiplimitsconcernsaboutinter-temporalsubstitution,althoughsomeofthe liberalizationeventsmayhavebeenpredictable,includingChina’sWTOaccession.

30OnlyMexicohadaconcurrentdomesticreform,andresultsholdwithoutit:see supp.appendix.

Second,Table A1 addressesconcernsrelatedtothecontrolgroup.Wefindsimilarresults whenweremovefromthedonorpooleachliberalizingcountry’s5majorexportand importtradingpartners(measuredintheimmediatepre-eventyears),alleviatingconcerns ofspilloverstocountriesinthecontrolgroup.31 Resultsarealsocomparablewhenthe donorpoolexcludescountriesthathavealreadyliberalized (basedonWacziarg&Welch, 2008), toguardagainsttheconcernthatthetrendsinthesyntheticcontrolgroupreflect thelonger-runeffectsofthetreatment(liberalization).Finally,tolessentheconcernthat treatedandcontrolcountriesexperiencedifferentunobservableshocks,wefindsimilar resultswhenthedonorpoolforeachtreatedcountryisrestrictedtothesameregion(or toLMICsonly).

5.2Regressionswithinstrumentalvariablesfortrade

5.2.1Empiricaldesign

Ourseconddesignemploysinstrumentalvariablesfortrade.Oneattractivefeatureis thattheIVprovidescausalestimatesunderdifferentidentifyingassumptionsthanthe event-study.Weestimatethefollowingmodelindevelopingcountries:

where yct isthe ETR (oranotheroutcome)incountry c inyear t, tradect istheshareof importsandexportsinNDP,and πc and πt arecountryandyearfixedeffects.32 Wecluster ϵct atthecountrylevel. Xct containsconfoundingdeterminantsof ETR:theexchange rate,grosscapitalformation,logofpopulation,andcapitalopenness (Chinn&Ito,2006 Rodrik, 1998). ETR timeseriesaresometimesvolatile(Figure 4),sowewinsorize ETR atthe5%-95%levelbyyearseparatelyforLMICsandHICs.

OLSestimationofequation(5)maybebiasedduetoreversecausalityandunobservable confoundingfactorsthatcorrelatewithtrade.Totrytoaddresstheseissues,weusethe twoinstrumentsfortradefrom Eggeretal.(2019). Thefirstinstrument,denoted Zgravity , reliesonthestructureofgeneralequilibriummodelsoftrade.Underthestandardgravity modelassumptions,itusestheaveragebilateraltradefrictionsbetweenexportingand importingcountriesasvariation(aggregatedtothecountry-yearlevel).Thisinstrument

31Wealsoverifythatnoneofthemaincountriesinthesyntheticcontrol(supp.appendix)hadexternalor domesticreformsintheevent-yearorinthepost-eventperiods (usingthedatainWacziarg&Wallack, 2004). Consistentwiththis,thelevelsoftheoutcomesinthesyntheticcontrolarerelativelystable throughouttheeventperiods.Finally,notethatifthespilloverscorrespondtocoordinationofpolicies, thiswouldlikelybiasourestimationtowardsfindingnulleffects.

32Weincludefixedeffectsforimputedandinterpolatedvalues,aswellasforeachtaxandnationalaccount datasource(Section 3.2),toensureresultsarenotdrivenbychangestodataquality.Resultsalsohold withoutimputedvaluesandwithineachdatasource(Table A3).

isvalidifthedistribution(notthelevel)oftradecostsamongindividualcountry-trading pairsisnotinfluencedby ETRsintheimportorexportcountry.Thesecondinstrument, denoted Zoil distance,interactstime-seriesvariationinglobaloilpriceswithacountryspecificmeasureofaccesstointernationalmarkets.Accessiscapturedbythevariance ofdistancetotheclosestmaritimeportforthethreemostpopulatedcities.Thistimeinvariantmeasurecapturestheinternalgeographyofacountryandimpactstransportation costs:followingaglobalshocktooilprices,transportationcostswillbehigherincountries withlessconcentratedaccesstoports,leadingtoalargerdropinimportsandexports. Thisinstrumentisvalidiftheinteractionbetweenglobaloilpricesandcountry-specific measuresofspatialconcentrationisuncorrelatedwithchangesin ETRs.Conceptually, bothinstrumentscapturevariationintradecostsdrivenbyeconomicforcesthatare plausiblyexogenousto ETRsandtheirdeterminants(detailsin supp.appendix).

InLMICs,the 1st-stageisstrongerinthe2000sandathigherincomelevelsfor Zoil,and inearlierperiodsandatlowerincomelevelsfor Zgravity (supp.appendix).Restrictingthe analysistosub-sampleswhereoneoftheinstrumentshasastrongfirst-stageintroduces bias(Mogstad,Torgovistky,&Walters,2021).Instead,wecombinethetwoinstruments toestimatealocalaveragetreatmenteffectthatisrepresentativeofLMICsacrossincome levelsandtimeperiods.Table A2 showsthe 1st-stage.33

5.2.2Instrumentalvariableresults

Table 1 presentstheresultsinLMICsfor ETRK inPanelA,and ETRL inPanelB.34 In column(1),theOLSuncoverspositive,significantassociationsbetweentradeandboth ETRs.Incolumn(2),weemploythetwoinstruments.The 1st-stageKleibergen-Paap F-statisticis24.59.TheIVshowsthattradecausesanincreaseinbotheffectivetaxrates, andthecoefficientfor ETRK (0.151)isthreetimeslargerthanfor ETRL (0.047).These magnitudesareeconomicallymeaningful:movingfromthe 25th tothe 75th percentileof tradeopennessinLMICswouldcausea8.9percentagepointsincreasein ETRK .

TheremainingcolumnsofTable 1 presentthreesetsofrobustnesschecks.Inthefirst set(Columns3to7),wemodifythespecification.Themostnotabledifferenceisthat thecoefficienton ETRK increases(to0.211)whenweweightheregressionusingNDP (Column4),puttingthusmoreweightonthevariationinlargerdevelopingcountries. Theresultshardlychangewhenwe:usenon-winsorized ETRs(Column3);include

33Table D1 showstheinstrumentsimpactimportsandexports,andtradeinintermediategoods-services (G-S)andfinalG-S.Thus,ourIV-estimatescomprehensivelyreflecttheimpactsoftradethroughrisesand fallsinfinalandintermediategoodsandservicesthatflowbothinandoutofthecountry.

34Relativeto ETR coverage,thesamplesizedropsby4.5%duetodata-availabilityofinstruments.

controls(Column5);35 allowoil-richcountriestobeonaseparatenon-parametrictime path(Column6),whichaddressestheconcernthattheidentifyingvariationfor Zoil dist iscorrelatedwithtrendsin ETRsspecifictooil-richcountries(Figure 4);winsorizetrade openness(Column7).

Inthesecondsetofrobustnesschecks,weimplementthealternativecapitalandlabor assignmentstoPITandmixed-income,describedinSection 4.2.Inourbenchmark,the capitalshareofmixedincomeistime-invariant,yettrademaycausefactorsharesto change.Incolumns(8)-(9),weallowfactorsharestorespondtotradebyimplementing thetwomethodswhichcreatecountry-yearvaryingcapital-sharesofmixedincome:the resultsarecomparable.TheyalsoremainsimilarwhenwefixthecapitalshareofPITat 0%(column10)orat30%(column11)inallcountriesovertime.Inthethirdrobustnessset (columns12-13),weestimateIVsusingeachinstrumentseparately.The 1st-stageF-statistic is45.13for Zgravity and10.75for Zoil.TheIVestimatesarecomparable,thoughlargerwhen basedon Zoil.Leveragingtheoppositesigneffectsofthetwoinstrumentsontrade,the reducedformresults(Table A2)suggestthatopennesseffectsaresymmetric:increased tradeincreasesboth ETRL and ETRK ,whilereducedtradedecreasesboth ETRs.

Finally,ourresultsarebasedonanunbalancedpanelcombiningseveraldatasources (Section 3.2- 3.3).Table A3 showsthattheresultsarequalitativelysimilarwithineach data-sourcefortaxes(newlydigitizedgovernmentrecords;OECD;ICTD)andnational accounts(SNA1968;SNA2008),aswellasinbothquasi-balancedpanels(preandpost1994)andinastronglybalancedpanel(1965-2018).36

Quantifyingtheroleoftrade Howmuchofthe ETRK riseinLMICssince1989canbe accountedforbyrisingtrade?Between1989and2018,theweighted ETRK inLMICsrose by8.7ppt(Section 4.2)andtradeopennessby13.6ppt.TheNDP-weightedIVfortrade’s impact(col.4ofTable1)isarguablythemostcomparable,sincethe ETRK trendsinSection 4 arealsoweighted.Usingthisestimatewouldimplythattradeopennessaccountsfor 33%oftherisein ETRK (0.211 ∗ 0.136/0.087=0.329).ConsideringallestimatesinTable 1 generatesarangeof21-42%.37

5.3Impactsoftradeopennessontotaltaxrevenues

Wefindpositiveeffectsoftradeoncapitalandlabortaxation,buthowdoestradeimpact overall taxrevenues,includingindirecttaxes?Thisisarelevantquestion,astrade-induced taxlossesfromliberalizationremainanimportantconcernforpolicymakers(Hallaert,

35ResultsalsoholdwhencontrollingforGDPpercapita(notshown).

36Variationbetweencoefficientsmayreflectdataqualityor 1st-stageandtreatmentheterogeneity.

37Forreasonsdiscussedin 5.1.2,wedonotusetheevent-studyestimatesforthisexercise.

2010;WorldBank,2020).Table 2 presentstheOLSandtheIVestimationoftheeffectof tradeontotaltaxes(%ofNDP),inLMICs,aswellasonindividualtaxrevenuestreams. Totaltaxesincludedirecttaxesoncapitalandlabor,aswellasindirecttaxes(sumoftaxes ontradeanddomesticconsumption).38

ThetradecoefficientfortotaltaxcollectionispositiveandsignificantinboththeOLS andtheIV.TheIVcoefficient(0.101)iseconomicallylarge:movingfromthe 25th tothe 75th percentileofopennessinLMICswouldcausea5.9pptincreaseintotaltaxes(the unweightedaveragetax/NDPratioinLMICsis17.6%).Thisresultismainlydrivenby highercorporateincometaxes,whichaccountforjustoverhalfoftheincreaseintotal taxes,andtoalesserextentbysocialsecurityandpersonalincometaxes.39 Tradehasa positive,butstatisticallyinsignificant,effectonindirecttaxes.

Trade’simpactontotaltaxesisrobusttousingNDP-weights;includingcontrols; winsorizingtrade;andusingeachinstrumentseparately(Table A4).

WecanalsostudytheimpactofthetradeliberalizationeventsfromSection 5.1 ontotal taxrevenue.Usingtheevent-studymethodology,Figure A3 showsthatthetradeevents ledtoanincreaseinoveralltaxcollection,withabreakfromthestablepre-trend.

Onelimitationisthatwedonotseparatelystudytrade’simpactontariffrevenues versusdomesticconsumptiontaxes,asourdatadoesnotcontainasystematicbreakdown betweenthesetwoindirecttaxes.Thisreflectsourinitialfocusondirectcapitalandlabor taxes,butadditionaldataworkwouldpermitaseparationoftheseindirecttaxes.

40

BoththeeventstudyandtheIVindicatethattradeleadstohigheroveralltaxationin LMICs.Thisfindingrelatestotheliteratureonthenetimpactofopennessontaxrevenues, whichfindsmixedresultsduetodifferencesinsample,empiricalstrategyanddefinitionof openness(Section 2);41 moreover,someofthesestudiesfocusonthenetimpactoftradeon indirecttaxesandabstractfromdirectdomestictaxes.Wecontributebycomprehensively studyingthetotaltaximpactofopenness,basedonimplementingseveralidentification strategiesinthelargestsampleofdevelopingcountriestodate.

6Mechanisms

Thissectioninvestigatesmechanismsfortrade’simpactontaxes,especially ETRK

38Long-runtrendsintaxationbytypeanddevelopmentlevelareinthe supplementaryappendix

39CITgrewsignificantly,asashareofNDP,between1989and2018:seeFigure A2

40Whilethesignofopenness’impactontariffrevenuecouldinprincipledifferdependingonwhetherthe reductionintradecostsisinitiallyduetoeconomicforces(asintheIV)orpolicychanges(asintheevent study),wefindpositiveimpactsinbothcasesondomesticcapitalandlabortaxes,andontotaltaxes.

41Animportantstudyinthisliterature, BaunsgaardandKeen(2009) writesintheconclusion:"itispossible thatindirecteffectsoperatingthroughhigherlevelsofopennessandincomeconsequentupontradereform havemorethanoffsetthedirectlossofrevenueidentifiedhere."

6.1Outliningthetaxcapacitymechanism

The taxcapacity mechanismcombinestwodistinctinsightsfromthetradeandpublic financeliterature(Section 2):first,tradeexpandsactivityincorporatestructuresand largerfirmsrelativetosmallerbusinessesandself-employment;second,effectivetaxation increaseswithfirmsize.Tofixideas,considerthefollowingdecompositionof ETRK :

Thisdecompositionshowsthattheeffectivetaxrateoncapital ETRK iscomposedof twoparts.42 Thefirstpartcapturescapitaltaxationwithinthecorporatesector.Itisthe productofthecorporatesector’sshareofNDP, µK C ,andtheaverageeffectivetaxrate oncapitalinthecorporatesector, ETRK C .Theformerisdirectlymeasuredinnational accounts(employeecompensationpluscorporateprofitsnetofdepreciation),whilethe latteriscomputedastheratioofcorporateincometaxrevenuetocorporateprofits.Inthe secondpart, ETRK NC measurestheeffectivetaxrateoncapitalinthenon-corporatesector; itismultipliedbythenon-corporatesector’sincomeshare, 1 µK C ,whichincludesmixed incomeofunincorporatedenterprisesandhouseholdsurplus(rentsandimputedrents).43 InLMICs, ETRK C is50%largerthantheoverall ETRK (19.9%versus13.3%).This stemsfrombothstrongerenforcementandhigherstatutorytaxburdensinthecorporate sector.44 Hence,theexpansionofthecorporatesectorrelativetothenon-corporatesector (i.e.anincreasein µC )couldincrease ETRK .

Theconjecturethattradeexertsataxcapacityeffectisrootedintheliteratureon tradeandfirmsize (describedinDix-Carneiroetal., 2021). First,tradecanleadto increasedmarketopportunitiesthatdisproportionatelybenefitlargeexporters(Melitz, 2003).Second,tradecanexpandtheavailabilityofintermediategoodsandlowertheir prices,whichcoulddisproportionatelybenefitinitiallylargerfirms (forexampledueto fixedcostsasinKugler&Verhoogen, 2009). Throughthesetwochannels,tradecould expandthecorporatesector’sshareofnationalincome(µC ),aslargerfirmsaremore likelytobeincorporated.Moreover,bybenefitinginitiallylargerfirmsorleadingtofirm

42Inthissection,capitaltaxationisdenotedwitha K-superscripttoaccommodateadditionalnotation.

43ETR K NC ismeasuredastheratiooftaxrevenuefrompropertyandwealth,self-employment,andthePIT assignedtocapital,overcapitalmixed-incomeandthesurplusofthehouseholdsector.Itisthuscomposed ofamixofvariables,whicharearguablynotaswellmeasuredasthosefromthecorporatesector.

44Theabilitytolevyhighertaxratesisendogenoustoenforcement (Bergeron,Tourek,&Weigel, 2024). Our notionoftaxcapacityisthattheseco-determinedforcesjointlycontributetoeffectivetaxation.

sizegrowthwithinthecorporatesector,tradecouldalsoincreasetheaverageeffective corporatetaxrate, ETRK C .Thiseffectwouldbedrivenbyapositivefirmsize-ETRK i gradient,wheresizeismeasuredasfirmrevenue.Thepositivegradientarisesbecause complianceandenforcementincreasewithsize.45 Italsoarisesbecausethetaxcodein LMICsoftenleadstohigherstatutorytaxburdensforlargerfirms (R.Kumar&James, 2022): usingadministrativetaxdata,Bachasetal.(2023)findapositiveassociationbetween firmsizeandthestatutoryeffectivetaxrateforcorporatefirmsin15LMICs.46

6.2Resultsonmechanisms:Taxcapacityandracetothebottom

Weinvestigatemechanismsrelatingtradeto ETR,focusingonthetaxcapacityand’race tothebottom’channels.Intheracetobottom,internationaltaxcompetitionleadsgovernmentstoreducestatutorycorporatetaxrates,whichwouldreduce ETRK C (Section 2). WestudybothmechanismsinLMICswiththeempiricalstrategiesofSection 5.

Table 3 showstheOLS(PanelA)andtheIV(PanelB)fromequation 5.Consistent withrace-to-bottom,column(1)showsthattradecausesadecreaseinthestatutoryCIT rate(significantat10%).47 TheCITrateisanimperfectproxyoffirms’taxincentivesasit ignoresthetaxbase (Abbas&Klemm, 2013), butitcanbemeasuredinourfullsample.

Inlinewiththetaxcapacitymechanism,traderaisesthecorporateshareofdomestic output(µC ),andreducesmixedincomebyanequivalentmagnitude.48 Thisisconsistent withtheconjecturethattradedisproportionatelybenefitslargerfirms,whicharemore likelytobeincorporated.Tradealsoraises ETRK C (column6),consistentwiththetradeinducedcorporateoutputaccruingtofirmswhose ETRK -sizegradientispositive.

Howistheadditionalincomeofthecorporatesectorallocatedbetweencapitaland labor?Columns(4)-(5)showthatthecorporatesectorriseisentirelydrivenbyhigher corporateprofits,whilethechangeinemployeecompensationgrowthissmallandsta-

45SeestudiescitedinSection 2.Forexample, Bestetal.(2021) uncoveranegativesize-evasiongradientusing randomizedauditdataonfirmsinPakistan,findingalsothatfirm-sizeisthemostsignificantpredictor ofevasion.Modelsoftaxcomplianceprovidemicro-foundationsforthenegativesize-evasiongradient (includingKlevenetal., 2016;Kopczuk&Slemrod, 2006).

46Thegradientispositiveeverywhereexceptattheverytopofthesize-distribution,whereitbecomes negative.Thegradientisdrivenbypreferentialtaxtreatmentsthatincreasewithfirmsizeandwith characteristicsthatcorrelatewithsizesuchastotalprofits.Thegradientcanalsoreflectavoidance behavior,iflargerfirmsareonaveragelessabletotakeactionsthatreducetheirlegaltaxliability.

47Theoutcomeisthefirst-differencedtaxrate(Romer&Romer,2010).Table A4 showsresultswiththelevel oftheCITrate.WecombinedatafromVéghandVuletin(2015), Eggeretal.(2019), TaxFoundation (link) andcountry-specificsources.Anextstepcouldbetostudytrade’simpactonthemoredetailedstatutory measures(Section 2).ThedownwardtrendinCITratesinLMICs(supp.appendix)isrelatedto,butdoes notfullycapture,changesovertimeinthedetailedstatutorymeasures.

48Thequalityofdata-sourcesusedbynationalstatisticsofficescanaffectthemeasurementofmixedincome inLMICs,butwefindnoimpactoftradeoncountries’statisticalcapacity (WorldBanklink).

tisticallyinsignificant.49 This,inturn,causestradetoexpandthecapitalshare,bothof nationalincomeandofthecorporatesector(columns7-8).50

ThemechanismIV-resultsarerobusttoseveralchecks(Table A4):usingNDPweights; includingcontrols;winsorizingthetradevariable;and,estimatingIVsseparatelybased oneachinstrument.TheCITrateresultremainslessrobustthanthetaxcapacityresults.

Figure A3 studiesthesamemechanism-outcomesbutusingtheevent-studydesign (Section 5.1).ThetradeliberalizationeventsledtoadecreaseintheCITrateandraised bothcorporateincome(µC )andtheeffectivecorporatetaxrate(ETRK C ).Someindividual event-timecoefficientsarelesspreciselyestimated,butthepost-eventdummiesarejointly statisticallysignificantforalloutcomes.Althoughtheyarebasedondifferentidentifying variationintrade,theevent-studyandIVresultsarethereforebothconsistentwiththe existenceofthetax-capacityandrace-to-bottommechanismsindevelopingcountries.

6.3Firm-levelinvestigationoftaxcapacitymechanism

Thetaxcapacitymechanismisbasedonafirmlevelchannel,combiningapositiveimpact oftradeonfirmsizewithapositivefirmsize-ETRK gradient.Whilethemacro-results on µC and ETRK C intheprevioussubsectionareconsistentwithit,inthissubsectionwe directlyinvestigatethetaxcapacitymechanismatthefirmlevel.

WeconducttheanalysisinRwandabetween2015and2017,whereweleveragemultiple administrativedatasetstoobserveeachformalRwandanfirm’sexposuretotradeand domestictaxpayments.Toourknowledge,thereislimitedfirmlevelevidenceinLMICs onhowtradeimpactsafirm’sdomesticeffectivetaxrate.Rwandaisaninteresting settingasthecorporatesector,startingfromacomparativelylowoutputshare,hasgrown significantlysincethe1990s,intandemwithariseintradeopennessandtaxrevenues.

Weusecorporateincometaxreturnstomeasureeachfirm’seffectivetaxrate ETRK i as theratioofcorporatetaxespaiddividedbyreportednetprofit.Netprofitisrevenueminus material,labor,operational,depreciationandfinancialcosts.InRwanda,thisfirm-level ETRK i variesduetofirmcharacteristics(includingrevenue,ourproxyforsize),reduced ratesandexemptions(Mascagni,MonkamandNell,2016).This ETRK i canalsovarydue totaxavoidancebut,sincethedenominatorisbasedontaxreturns,itwillnotcapture

49Thereisalsoanulleffectoftradeonhouseholds’operatingsurplus OSHH (resultnotshown).

50Thiscouldoccurduetoanincreaseinmarkups. DeLoeckerandEeckhout(2021) findthatmarkupshave riseninmostregionsoverthepast40years. DeLoecker,Goldberg,Khandelwal,andPavcnik(2016) and Goldberg(2023) studytheimpactoftradeonmarkups. Gupta(2023) andAtkinetal.(2015)findthat markupsincreasewithfirmsize,respectivelyinIndiaandPakistan.Theriseincorporateprofitsand limitedchangeinemployeecompensationmayalsoariseiftraderaisesfirms’labormarketpower (Felix, 2022). Finally,itmayariseiftradebenefitsmorecapital-intensiveproductionindevelopingcountries, includingthroughareductioninCITrates(KaymakandSchott,2023).

outrightevasion.51 Thecorporate ETRK i inRwandaiseverywherepositivelyassociated withsize(proxiedbyfirmrevenue),apartfrominthetoppercentile (Bachasetal., 2023). Outsideoftheverytop,anincreaseinfirm i’ssizemaycause ETRK i torise. WemergetheCITreturnswithcustomsdatatorecordfirms’directexposuretotrade. Followingrecentwork(reviewedin AtkinandKhandelwal, 2020, Bernard&Moxnes, 2018),wemeasureafirm’stotalexposuretotradebyalsoaccountingforthefirm’s indirectexposureviaitslinkagestodomesticsuppliersthatusetradedgoodsintheir production.52 Wemergeadministrativedatathatrecordtransactionlinkagesbetween formalfirms(detailsondataandsampleinAppendix D.1).Tomeasureafirm’stotaltrade exposureinanetworksetting,wefollowthemethodologyin Dhyne,Kikkawa,Mogstad, andTintelnot(2021) thatusessimilardatasetstomeasureBelgianfirms’exposureto trade.Specifically,wedefinefirm i’stotalforeigninputshareastheshareofinputsthat itdirectlyimports(sFi),plustheshareofinputsthatitbuysfromitsdomesticsuppliers l (sli),multipliedbythetotalimportsharesofthosefirms:

where Vi isthesetofdomesticsuppliersoffirm i,and Vl isthesetofdomesticsuppliers offirm l.Thedenominatoroftheinputsharesisthesumofimportsandpurchasesfrom otherfirms.Welimittherecursivecalculationin(8)toinputsfromafirm’simmediate suppliers l andthesupplierstotheirsuppliers r (addingmorelevelsonlymarginallyraises sTotal i ).53 Inspecting sTotal i and sFi revealsthatwhilejustunder30%ofRwandanformal firmsimportdirectly,93%relyontradedirectlyorindirectlythroughsupplierswhich useforeigninputsintheirproduction.Mostfirmsarethereforedependentonforeign trade,butonlyalimitednumbershowthatdependencethroughthedirectforeigninputs observedincustomsdata.Themediantotalforeigninputshareis48%.

Weestimateregressionsinthesampleofcorporatefirmsoftheform:

51Forthisreason, ETR K C measuredinnationalaccountsdiffersfromthe(appropriatelyweighted)corporate ETRK i measuredintaxreturns.Theyalsodifferbecauseofconceptualdifferencesinthemeasurementof profits:seethe supplementaryappendix foradetaileddiscussion.

52RecentpapersstudydomesticlinkagesinLMICsandtheirroleinpropagatingtradeshocks (including Almunia,Hjort,etal., 2023;Fieler,Eslava,&Xu, 2018;Javorcik, 2004).

53Wefocusonfirms’exposuretoimportsthroughtheirsuppliernetwork;wefindqualitativelysimilar resultswhenwestudyfirms’exposuretoexportsthroughtheirclientnetwork(resultsavailable).

where ETRK it and sTotal it arethecorporateeffectivetaxrateandtotaltradeexposureoffirm i inyear t,and πt and πi areyearandfirmfixedeffects. Xit includesnumberofemployees andnumberofclientsandsuppliers,and ϵit isclusteredatthefirmlevel.

InTable4,theOLSestimationof(9)showsthatawithin-firmincreaseintradeexposure isassociatedwithahighercorporateeffectivetaxrate.Thisresultholdswithonlyyear fixedeffects πt (column1);withindustry-geographyfixedeffects(column2);withfirm controls Xit (column3);withfirmfixedeffects πi (column4).

InTable 4,column(5),weimplementanIVthatgeneratesfirm-levelvariationin tradeexposureusingtheshift-sharedesignfrom Hummelsetal.(2014). Theidentifying variationistradeshocksfromchangesintheworldexportsupplyofspecificcountryproductcombinationsinwhichaRwandanfirmhadapreviousimportrelationship. Specifically,thedirectimporttradeshockforfirm i inyear t is:

where sa,M ic,t 1 istheshareofimportsoffirm i inyear t 1 thatfallsonproduct a from country c,and WESa,c,t istheworldexportsupply(excludingsalestoRwanda)ofcountry c forproduct a.Product a ismeasuredatthedetailedsix-digitHSlevel.Rwandanfirms importover3,510distinctproductsfrom174differentcountriesoforigin.

TheshockstoRwandanfirms’tradingenvironmentaretime-varyingandspecificto eachpartner-country × productbeingtraded.Theycapturetransportationcostsand worldwideshockstoexportsupplyfortherelevantcountry × product,andcontain granularvariationacrossproductsandcountries.Theidentificationstrategyrestson thejointhypothesesthattheseshocksareplausiblyexogenoustoRwandanfirms’trading environmentandthattheycreatevariedimpactsacrossfirmsbecauseRwandanimporters havefewimportedinputsincommon.Indeed,thecustomsdatashowsthatthemedian numberofuniqueimportingfirmsinagivenHS6product × countryandtimeperiodis 1;the 95th percentileis3.Hence,ifonlyoneRwandanfirmimportsmetalcoredwires fromTurkey,anidiosyncraticshocktoTurkey’sglobalexportsupplyofthosewireswill affectjustonefirminRwanda.Notealsothat,toconstructthetradeshocks,werely onpriorinformationaboutimporters’sourcingpatterns,whichremovesconcernsover contemporaneousshocksaffectingboththechoiceofimportedgoodsandfirmoutcomes.

Webuildthetradeshocksforallfirms.Inturn,the 1st-stageinstrumentsarethefirm’s owntradeshocks,aswellasthetradeshockstoitssuppliersandtothesuppliersofits suppliers.Specifically,the 1st-stageregressionis:

where logM D it , logM S it ,and logM SS it arethetradeshockstofirm i,tofirm i’ssuppliers,and tothesuppliersoffirm i’ssuppliers.Weconstructweightedaveragesoftradeshocksin thesuppliernetworkusingtherecursiveformulationin(8)(detailsinAppendix D.1).

Wefindthatbothdirecttradeshockstoafirm’sownimportsandindirectshocksto afirm’snetworkofsupplierscausesignificantchangestothefirm’stotalexposure sTotal it , generatingastrong 1st-stage(Kleibergen-PaapF-statisticof18.17).

TheIVspecificationshowsthattradecausesanincreaseintheindividualfirm’seffectivetaxrateoncapital(column5).InPanelB,theIVrevealsthattradecausesanincrease infirmsize(proxiedbyrevenue).PanelCshowsapositiveOLSassociationbetweenfirm sizeand ETRK i (wecannotusetheIVinthispanelduetotheexclusionrestriction).

InAppendixD.1,wefindthatthemainresultsarerobusttocontrollingfortradeshocks tofirm i’spotentialsuppliers(firmsthatoperateinthesameindustryandgeographical areaas i’scurrentsuppliersbutarenotcurrentlysupplyingto i)andhorizontalsuppliers (firmsthataresupplierstofirm i’scurrentclients).Theseresultsprovideadditional supportfortheexogeneityassumption.54

ThoughtheanalysisinRwandaisbasedwithinasinglecountryoveralimitedtime range,itsupplementsthemacro-levelresultsintwoways.First,itprovidesfirm-level identifiedevidencethattradeexertsapositiveimpactoneffectivecorporatetaxationina developingcountry,whichcomplementsthecountry-levelresultsinLMICs.Second,by showingthattradeincreasesfirmsizeandthatsizeispositivelyassociatedwith ETRK , itsupportsthetaxcapacitymechanisminterpretationthattrade’simpacton ETRK is mediatedbyapositivesize-ETRK gradient.

Discussion:Linkstotrade-formalityliterature Atthefirm,sectorandcountrylevel,we findpositiveeffectsoftradeonoutcomesrelatedtoformalization.Recentstudiesfocused onthenumberofformalversusinformalfirmsorformalversusinformalworkers,and foundmixedevidencethattradeincreasesformalitybythesemeasures (reviewsinEngel &Kokas, 2021;Ulyssea, 2020).55 Onewaytoreconcileourresultswiththesestudiesisto notethatourfocusisontheshareofoutputproducedinlargerandformalfirms:output expansioninthesefirmsmayoccurwithoutchangestothenumberofformalorinformal firms,anddoesnotimplyanincreaseinthenumberofformalworkers,sinceinformal workersmayworkinformalfirmsandcontributetotheiroutput (Ulyssea, 2018). In 6.4, wealsoshowthatopenness’impactonourformal-outcomesdependsonthenatureofthe tradeshock,consistentwithrecenttheoreticalworkintrade (Dix-Carneiroetal., 2021).

54Inanextension,wefindthatincreased output exposuretoimportsthroughtheclientnetworkhaspositive effectson ETRK ,thoughthisaverageeffectcouldmaskheterogeneityacrossfirms.

55GoldbergandPavcnik(2003),Boschetal.(2012),Crucesetal.(2018),Dix-CarneiroandKovak(2019).

6.4Sourcesofheterogeneityintrade’spro-taximpacts

Wereturntothecountry-levelIV(equation 5)tostudysourcesofheterogeneityintrade’s pro-taximpactsonthetaxcapacitymechanismand ETR.

Heterogeneity:Domesticenforcementreforms Overoursampleperiod,LMICshave implementedtaxenforcementpolicies.Achallengeforthemechanisminterpretation isthattrade,potentiallyduetorevenueconcerns,mayhavepromptedgovernmentsto implementthesepoliciesthatincrease ETRK .Toinvestigatethis,wemeasuretheyear ofadoption(ifany)inLMICsoffourpoliciesthatincreasedomestictaxenforcement:(i) largetaxpayerunit;(ii)organizationalintegrationofcustomsanddomestictaxauthorities; (iii)VAT;(iv)internationalaccountingstandards(IAS).56 WeestimateheterogeneousIV effectsbyincludinganinteractiontermbetweentradeandthepolicyadoptionvariablein (5).57 Table A5 showsapositiveeffectoftradeon ETRK withoutthesepolicies,though theeffectislargerfollowingtheiradoption.Tradehasasimilarimpactonthecorporate income-share(µC )withandwithouttheenforcementpolicies,buttrade’spositiveimpact on ETRK C issignificantlyamplifiedwhenenforcementpoliciesareinplace.58 Thatis,the trade-inducedexpansionofthecorporatesectorseemstooccurregardlessofenforcement policies,buttheextenttowhichtheadditionalcorporateoutputtranslatesintohigher effectivecorporatetaxationisreinforcedwhensuchpolicieshavebeenenacted.59 GovernmentsinLMICsmayhavesoughttoraisedomesticrevenue,possiblyinresponsetoopenness,throughotherchannelsapartfromthesespecificenforcementpolicies. WeinvestigatethisinTable A6,findingthattrade’spositiveimpactonthetaxcapacity mechanismand ETRK holdoutsideofperiodsofsignificantrevenueloss,whendefined invariouswaysincludingtheepisodesoftraderevenuelossin CagéandGadenne(2018). Thus,trade’spro-taximpactsappeartobebroadlypresentintheglobalizationprocessin LMICs,anddonothingeongovernment’srevenueneedorenforcementinvestments.

Heterogeneity:Natureoftradeshock Tradetheorieshighlightthattheimpactsoftrade onformality-relatedoutcomesdependonthenatureofthetradeshock.InAppendix D.2,weusebothinstrumentsandequation(5)inLMICstoinvestigateifthe ETR and

56Theenforcementfocusonlargefirmsincreasescollection (Almunia&Lopez-Rodriguez, 2018;M.C. Basri,Felix,Hanna,&Olken, 2021). Thecustoms-taxunificationimprovesdomesticauditcapacity(IMF, 2022).TheVATcreatesinformationtrails (Almunia,Henning,Knebelmann,Nakyambadde,&Tian, 2023; Waseem, 2020). IASdeepenaccountingrequirementsfortaxreporting(Barthetal.,2008).

57Thetimingofadoptionforeachreformisendogenous;however,ourfocusisonthetradecoefficientswith andwithoutthesereformsinplace,whichareidentified(BunandHarrison,2019).

58OnlytheVATwasadoptedinallliberalizingcountriesbythetimeoftheeventsstudiedinSection 5.1

59Intuitively,theenforcementpoliciesalldisproportionatelyraiseenforcementonlargerfirms,thereby furtherincreasingtheslopeofthe ETRK -sizegradientinsidethecorporatesector.Whethertheseenforcementpoliciesarethemselvesdrivenbyglobalizationisatopicforfutureresearch.

mechanismimpactsdifferalongtwodimensions (Dix-Carneiroetal., 2021): imports versusexports;and,tradeinintermediateversusfinalgoodsandservices(G-S).Wefind that exports increase ETRK andthecorporateincome-share(µC ),while imports decrease bothoutcomes.Theseresultsareconsistentwith’Melitz-type’demandeffects,whereby increasedexportsrepresentapurepositivedemandshockforexport-orientedfirms, whileincreasedimportsmayconstituteanegativedemandshockfordomesticfirms, disproportionatelyaffectinglargerones.InadditionalIVregressions,tradein intermediate G-S increases ETRK and µC ,whiletradein finalG-S decreasesbothoutcomes.60 Results aresimilarfor ETRK C .Theseresultsareconsistentwiththeincreasedavailabilityof intermediategoodsbenefitinglargerfirms;bycontrast,theincreasedavailabilityoffinal goodsmayconstituteanegativedomesticdemandshock,particularlyforlargerfirms. Theseresultssuggesttrade’spro-taximpactsdependonthenatureofthetradeshock.

Heterogeneity:Developingvsdevelopedcountries Weinvestigateiftrade’simpacts onmechanismsand ETR differacrossdevelopmentlevels,byexpandingoursample toincludeHICs.Weexpectthatthetaxcapacitymechanismislesslikelytooperate inHICs,whereenforcementconstraintsoneffectivetaxationarelessbindingandthe corporatesector’ssizehasbeenstablesincethe1970s(Figure 1).Ontheotherhand,the race-to-bottomislikelytobeactiveinHICs,givenpreviousresearch(Section 2).Table A7 reportsheterogeneousIVeffectsbyaugmenting(5)withaninteractionbetweentrade andadummyforhigh-incomecountries.61 Tradeonlyraises ETRK inLMICs,butraises ETRL everywhere.Thenegativerace-to-bottomeffectontheCITrateismuchstrongerin HICsthaninLMICs.Thepositiveimpactoftradeontaxcapacityoutcomes(µC , ETRK C ) islimitedtoLMICs,withnulleffectsinHICs.62 Theseresultssuggestcountervailing mechanismsthatdifferbydevelopmentlevel,throughwhichtrademayhavecontributed tothedivergingtrendsin ETRK betweenHICsandLMICsdocumentedinFigure 2. Westudyadditionalcountrycharacteristicsinthe supplementaryappendix.Wefind thattrade’snegativeimpactontheCITrateislargerincountriesthataresmallerand withfewercapitalrestrictions–twosettingswherecapitalflightconcernsaremorepronounced (Hines, 2006). Mirroringthisresult,trade’spositiveimpacton ETRK occursin largercountriesandwithmorecapitalrestrictions.Thetaxcapacityandrace-to-bottom mechanismsthereforeappeartooccursimultaneously:countrieswithlargermarketsand lowercapitalmobilityreapmoreofthetax-capacitybenefitsoftrade.

60Whichsuggeststhatimportsofintermediate(final)G-Sincreases(decreases) ETRK and µC

61Wenotetheseresultsshouldbeinterpretedwithcaution,giventheeconometricchallengesofestimating IVeffectswithmultipleendogenousregressors (Andrews,Stock,&Sun, 2019).

62TheIV-coefficientsfordevelopingcountriesdifferqualitativelybetweenTable A7 andTables 1-3.Thisis becausethetwoinstruments’strengthchangesinthe 1st-stageregression(Table A2).

Extension:Capitalopenness Wefocusedontradeopennessbutanotherrelevantdimensionofglobalizationiscapitalopenness(Ilzetzki,Reinhart,&Rogoff, 2019;VanPatten, 2022). Duetodifferencesinreportingrequirements,dataoncapitalopennessisnotas availableandcomparableastradedata,andfindingcredibleexogenousvariationforcapitalopennessischallenging.Notwithstanding,wetrytoinvestigatetheimpactsofcapital opennessinAppendix E.Werelyoncapitalinflowliberalizationeventsfor25developing countriesfrom Chari,Henry,andSasson(2012), whichcapturethefirsttimethatforeign investmentinthedomesticstockmarketisallowed.Employingtheevent-studydesign ofSection 5.1,wefindthatcapitalliberalizationeventsraisecapitalopennessandpositivelyimpact ETRK andthetaxcapacitymechanism(µC , ETRK C ).Thepro-taximpactsof globalizationinLMICsmayberobusttousingcapitalinsteadoftradeopenness.

7Conclusion

Thispaperprovidesevidenceonlong-runtrendsincapitaltaxationandcausaleffects ofglobalization.Basedonanewmacro-historicaldatabase,wedocumentthateffective capitaltaxrateshaveincreasedindevelopingcountriesinthepost-1990eraofhyperglobalization.Byexpandingtheshareofeconomicactivityinincorporatedandlarger firms,wefindthattradeimprovestheeffectivecollectionoftaxes,particularlycorporate incometaxes.Weprovideevidenceonthistaxcapacityeffectacrossmultipleresearch designsandatthecountry,corporatesectorandfirm-level.Despiteasimultaneous negativeeffectoncorporatestatutorytaxratesinducedbyinternationaltaxcompetition, thepositivetaxcapacityeffectissufficientlylargethattradeincreasestheeffectivetaxrate oncapitalandoverallgovernmentrevenues(%ofGDP)indevelopingcountries.

Duetolimiteddata,therevenueconsequencesofglobalizationindevelopingcountries hadnotbeensystematicallyinvestigatedandpolicyconcernsoverrevenuelosseshave persistedinacontextofuncertaintysurroundingthefutureofglobalization (Goldberg &Reed, 2023). Wefindthatglobalizationhaspro-taximpactsthathavesupportedthe effectivetaxationofcapitalandoverallrevenuecollectioninmanycountries.

Ourresultsshowthatopennessincreasedtheshareofmarketincomegoingtocorporations,profits,andcapital.Simultaneously,trade’spro-taximpactsmeanthatdeveloping countriesraisedmoretaxesfromcapital.Asaresult,opennessislikelytohavewidened pre-taxincomeinequality,butitseffectonpost-taxincomeinequalityismorenuanced.We adoptedamacrofocus,butanextstepcouldbetocombinethe ETRswithindividual-level estimatesoftheprogressivityofcapital(andlabor)taxes.Thiswouldallowacomparisonofthedistributionaleffectsofglobalizationonpreversuspost-taxincome,raising empiricalquestionsforfutureresearch (Goldberg, 2023;Pavcnik, 2017).

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Notes: Thesepanelsplotthetimeseriesofcorporatesectorincomeandofmixedincomebetween1965 and2018bylevelofdevelopment,fromnationalaccountsstatistics.Bothoutcomesareexpressedas apercentofnetdomesticproductandweightedbycountries’netdomesticproductinconstant2010 USD.Corporateincomeisthesumofcorporateprofitsandcorporateemployeecompensation.Mixed incomeaccountsforincomefromself-employedandunincorporatedbusinesses.Theleftpanelshow theresultsforlowandmiddle-incomecountries(N=117),andtherightpanelshowtheresultsforhigh incomecountries(N=37),basedontheWorldBankincomeclassificationin2018.

Notes: Thisfigureplotsthetimeseriesofaverageeffectivetaxratesonlabor(red)andcapital(blue), aswellastheaverageeffectivetaxrateoncorporateprofits(bluedashedline).Thetop-leftpanel correspondstotheglobalaverage,weightingcountry-yearobservationsbytheirshareinthatyear’s totalfactorincome,inconstant2019USD(N=154).Thebottom-leftpanelshowstheresultsforhighincomecountries(N=37),andthebottom-rightpanelforlow-andmiddle-incomecountries(N=117). IncomeclassificationisbasedontheWorldBankincomegroupsin2018.Thedatasetiscomposedof twoquasi-balancedpanels.Thefirstcoverstheyears1965-1993andexcludescommunistregimes.It accountsfor85-90%ofworldGDPduringthoseyears.Thesecondcovers1994-2018andintegrates formercommunistcountries,inparticularChinaandRussia,andaccountsfor97-98%ofworldGDP. ThisfigureisdiscussedinSection 4.1

Figure3:RobustnessofEffectiveCapitalTaxationinDevelopingCountries

(a)PITrevenueallocation

(b)Mixed-incomeallocation

(c)Panelbalancedness

(d)Weightsforaggregation

(e)All54combinations

Notes: Thesepanelsshowtrendsintheeffectivetaxrateoncapitalinthe117developingcountriesinour sample.Thepanelsvaryourfourkeymethodologicalchoices:theallocationofpersonalincometaxrevenue tocapitalvslabor(panela);theallocationofmixedincometocapitalvslabor(panelb);presentingresults foranunbalancedpanelofcountriesvsabalancedpanelviaimputations(panelc);and,theuseofweights toaggregateindividualcountries’time-series(paneld).Panel(e)showsall54possiblecombinationsthat canbeconstructedbycombiningthesechoices.Inallpanels,thebluelinecorrespondstoourbenchmark series.Developingcountriesarelowandmiddle-incomecountriesaccordingtotheWorldBankincome classificationin2018.ThisfigureisdiscussedinSection 4.2

Figure4:HeterogeneityofEffectiveCapitalTaxationinDevelopingCountries

(a)Fourlargestcountries

(b)ExcludingChina

(c)OilRichCountries

Notes: Thesepanelsshowtheevolutionoftheeffectivetaxrateoncapital, ETRK ,formajordeveloping countriesandsub-samplesofdevelopingcountries.Developingcountriesarelowandmiddle-income countriesaccordingtotheWorldBankincomeclassificationin2018.Panel(a)plotsthe ETRK seriesforthe fourlargest(mostpopulous)developingcountries:Brazil,China,India,Indonesia.Panel(b)comparesour benchmarkseriestotheseriesthatexcludesChina.Panel(c)plotsthe ETRK seriesforasampleofoil-rich countries(countrieswithmorethan7%ofGDPfromoilin2018),andthebenchmark ETRK serieswithout thesecountries.Withinthesampleofnon-oilrichdevelopingcountries,panel(d)compareslargecountries tosmallcountries.Largecountriesaredefinedashavingapopulationabove40millionin2018.Thisfigure isdiscussedinSection 4.3.

Figure5:Within-CountryAssociationsbetweenEffectiveTaxRatesandTrade

(a) ETRK :Allcountries (b) ETRL:Allcountries

(c) ETRK :High-income

(e) ETRK :Low&middle-income

(d) ETRL:High-income

(f) ETRL:Low&middle-income

Notes: Thesepanelsshowstheassociationbetweentradeandeffectivetaxrates.Theoutcomeistheeffective taxrateoncapital, ETRK ,andonlabor, ETRL,intheleft-sideandright-sidepanels,respectively.The toppanelsshowtheassociationsinallcountries;themiddlepanelsshowtheassociationsinhigh-income countries(basedonWorldBankincomeclassificationin2018);thebottompanelsshowtheassociations inlowandmiddle-incomecountries.Tradeismeasuredasthesumofimportandexportsasashareof netdomesticproduct.Boththex-axisandy-axisaremeasuredaswithin-countrypercentchangesover5 years.Eachgraphshowsbinnedscatterplotsofeachoutcomeagainsttrade,afterresidualizingallvariables againstyear-fixedeffects.Eachdotcorrespondstoaventile(20equal-sizedbins)oftheresidualizedtrade variable,withaveragevaluesoftradeand ETR calculatedbyventile.Ineachgraph,thelinerepresents thebestlinearfitbasedontheunderlyingcountry-yeardata,withthecorrespondingslopecoefficientand standarderrorreportedinthetop-leftcorner.Formoredetails,seeSection 4.4.

Figure6:EventStudyofTradeLiberalizationReforms

Notes: Thesefiguresshowevent-studiesfortradeliberalizationinsevenlargedevelopingcountries:Argentina,Brazil,China,Colombia,India,MexicoandVietnam.Thepanelscorrespondtodifferentoutcomes: trade(toppanels);effectivetaxrateoncapital(middlepanels);effectivetaxrateonlabor(bottompanels). Theleft-sidegraphsshowtheaverageleveloftheoutcomeineveryyearto/sincetheeventforthetreated groupandforthegroupofsyntheticcontrolcountries.Theright-handgraphsshowthe βe coefficients ontheto/sincedummies,basedonestimatingthedynamicevent-studyregressioninequation(4).The barsrepresentthe95%confidenceintervals.Standarderrorsareclusteredatthecountry-eventleveland estimatedwiththewildbootstrapmethod.Thetop-leftcornersreporttheF-statisticonthejointsignificance ofthepost-eventdummies,withthep-valueinparentheses.DetailsonmethodologyinSection 5.1.1.

Table1:TradeImpactsonEffectiveTaxationofCapitalandLaborinDevelopingCountries

Robustness:Specification

PanelA: ETRK

Robustness: K L assignment

Robustness:Individual

PanelB: ETRL

Modifications ETR NDPInclude IncludeWinsorizeAssign Assign AssignAssign OnlyuseOnlyuse toIVincol.(2) winsorizeweightscountry-year 1(oil-rich)*yeartrade basedonbasedon0%ofPIT30%ofPIT Zgravity ZOil Dist controlsfixedeffects ILO(2019) corp. K-sharetocapitaltocapitalinstrumentinstrument

Notes: Thistablepresentsresultsfromestimatingtheeffectoftradeoneffectivetaxratesindevelopingcountries.Developingcountriesarelowand middle-incomecountriesaccordingtotheWorldBankincomeclassificationin2018.Theoutcomeistheeffectivetaxrateoncapital, ETRK ,inPanel Aandtheeffectivetaxrateonlabor, ETRL,inPanelB.Tradeismeasuredasthesumofexportsandimportsdividedbynetdomesticproduct(NDP). Column(1)presentstheOLSresultsfromestimatingequation(5).AllothercolumnsuseIV;atthebottomofeachcolumn,wereportthe 1st-stage Kleibergen-PaapF-statistic.ThebenchmarkIVspecificationisincolumn(2),withthecorresponding 1st-stageregressionreportedinTable A2.The remainingcolumnsmodifythebenchmarkspecificationofcolumn(2).Incolumn(3),theoutcomeisnon-winsorized,whileincolumn(4)weinclude country-yearNDPweights.Incolumn(5),weincludethecountry-yearcontrolsdescribedinSection 5.2.1.Incolumn(6),weincludeinteractive fixedeffectsbetweenadummyforoil-richcountriesandyeardummies.Oil-richcountriesderivemorethan7%ofGDPfromoilin2018.Incolumn (7),weusethetradevariablewhichiswinsorizedatthe5%-95%percentileonayearlybasis.Incolumns(8)-(9),wemodifytheassignmentrule formixedincome’scapitalfactorshare,respectivelybyusingthe ILO(2019) methodandbyassigningthecapitalshareinthecorporatesector.In columns(10)-(11),weassignrespectively0%and30%ofpersonalincometaxes(PIT)tocapitaltaxes.Incolumns(12)-(13),weestimatetheIVusing theindividualinstruments Zgravity and Zoil distance,respectively.Formoredetails,seeSection 5.2.*p<0.10**p<0.05***p<0.01.Standarderrorsin parenthesesareclusteredatthecountrylevel.

PanelB:IV

Notes: Thistableshowstheimpactsoftradeoncollectionoftypesoftaxes,expressedasapercentof netdomesticproduct(NDP),indevelopingcountries.OLSresultsareinPanelAandIVresultsarein PanelB.Developingcountriesarelowandmiddle-incomecountriesaccordingtotheWorldBankincome classificationin2018.TradeismeasuredasthesumofexportsandimportsdividedbyNDP.Allregressions inPanelBarebasedontheIVmodeldescribedinSection 5.2.Atthebottomofeachcolumn,wereportthe 1st-stageKleibergen-PaapF-statistic.Thecorresponding 1st-stageregressionisreportedinTable A2.The outcomediffersacrosscolumns:Column(1)istotaltaxes,whichisthesumofdirecttaxesoncapitaland laborandindirecttaxesontradeanddomesticconsumption;column(2)iscorporateincometaxes(CIT); column(3)istaxesonproperty,wealthandinheritance;column(4)ispersonalincometaxes(PIT);column (5)issocialsecurityandpayroll;column(6)isindirecttaxes,whichcombinestradetaxesanddomestic consumptiontaxes.Formoredetailsonthesetypesoftaxes,seeTable B2 andAppendix B.1.Formore detailsontheIV,seeSection 5.2.*p<0.10**p<0.05***p<0.01.Standarderrorsinparenthesesareclustered atthecountrylevel.

PanelA:OLS

Table3:TradeImpactsonMechanismOutcomesinDevelopingCountries

PanelB:IV

First-diff.CorporateHouseholdCorporateEmployeeCorporateCapitalshareCapitalshare CITratetotl.incomemixedincomeprofitscompensation

Notes: Thistablepresentsresultsfromestimatingtheeffectsoftradeonmechanismoutcomesindevelopingcountries.Developingcountriesare lowandmiddle-incomecountriesaccordingtotheWorldBankincomeclassificationin2018.Tradeismeasuredasthesumofexportsandimports dividedbynetdomesticproduct(NDP).PanelApresentsOLSresultsandPanelBpresentstheIVresults,basedontheinstrumentsdescribedin Section 5.2.AtthebottomofeachcolumninPanelB,wereportthe 1st-stageKleibergen-PaapF-statistic.Acrossthecolumns,theoutcomediffers: column(1)isthefirst-differencedstatutorycorporateincometax(CIT)rate;column(2)isthecorporateincomeshareofnetdomesticproduct,where corporateincomeisthesumofcorporateprofitsandcorporateemployeecompensation;column(3)isthemixedincomeshareofnetdomestic product;column(4)isthecorporateprofitshareofnetdomesticproduct;column(5)istheemployeecompensationshareofnetdomesticproduct; column(6)istheaverageeffectivetaxrateoncorporateprofits;column(7)isthecapitalshareofnetdomesticproduct;column(8)isthecapitalshare ofcorporateincome.Forsakeofspace,weomitshowingtheinsignificantimpactoftradeon OSHH ,theremainingcomponentofnationalincome. Formoredetailsontheoutcomes,seeSection 3.1 andSection 6.2.Formoredetailsontheinstrumentalvariables,seeSection 5.2.*p<0.10**p<0.05 ***p<0.01.Standarderrorsinparenthesesareclusteredatthecountrylevel.

PanelAoutcome: ETRK

PanelBoutcome:Logrevenue

PanelCoutcome: ETRK

Notes: Thistablepresentsfirm-levelregressionresultsfromcorporatefirmsinRwandabetween2015and 2017.Theoutcomediffersacrosspanels:PanelsA)andC)istheeffectivetaxrateoncorporateprofits, ETRK i ;PanelB)islogofannualrevenue.InPanelsA)andB),thereportedregressioncoefficientisfortotal foreigninputshare, STotal;inPanelC),itisforlogannualrevenue.Columns(1)-(4)presentOLSresults fromestimatingvariationsofequation(9):Column(1)includesyearfixedeffects;column(2)addsindustrygeographyfixedeffects;column(3)addsfirm-yearcontrols(numberofemployeesandtotalnumberof clientsandsuppliers);column(4)addsfirmfixedeffects.Column(5)istheIVestimationwherethetotal foreigninputshare(STotal)isinstrumentedwithtrade-shockstofirmsandtheirsuppliernetworkbased ontheshift-sharedesignof Hummels,Jørgensen,Munch,andXiang(2014). Theinstrumentsaredescribed indetailinSection 6.3 andAppendix D.1.Incolumn(5),wealsoreportthe 1st-stageKleibergen-Paap F-statisticfromestimatingthe 1st-stageinequation(11).DetailsonthesampleareprovidedinAppendix D.1.*p<0.10**p<0.05***p<0.01.Standarderrorsinparenthesesareclusteredattheindustry-geography levelincolumns(1)-(3),andatthefirm-levelincolumns(4)-(5)(resultsarerobusttoclusteringatfirm-level inallcolumns).

Appendix

AppendixAAdditionalFiguresandTables

FigureA1:DataCoverageofEffectiveTaxRates

Notes: Thesepanelsshowthecoverageofoureffectivetaxratedatabetween1965and2018attheglobal level(topleftpanel),inhighincomecountries(bottomleftpanel),andinlow-andmiddle-income countries(bottomrightpanel).Low,middleandhigh-incomecountriesarebasedontheWorldBank incomeclassificationin2018.ThesolidlinesplotthepercentoftotalpopulationandGDPthatare coveredinourdata(leftaxis).Thedashedlinesshowthenumberofcountriesinthedata(right axis).Thedatasetiscomposedoftwoquasi-balancedpanels.Thefirstcoverstheyears1965-1993and excludescommunistregimes.Thesecondcovers1994-2018andintegratesformercommunistcountries, inparticularChinaandRussia.SeeSection 3.3 formoredetails.

FigureA2:Evolutionof ETRK Componentssince1989

Notes: Thesepanelsshowtheevolutionofthecomponentsof ETRK between1989and2018.Thisperiodis selectedtomatchtheperiodofrising ETRK inlowandmiddle-incomecountries(LMICs).Theleft-hand sidepanelscorrespondtothetaxesoncapital(numeratorof ETRK ):corporateincometaxes;taxeson property,wealthandinheritance;andtheshareofpersonalincometaxesallocatedtocapital(including capitalgainsanddividends).Theright-handsidepanelscorrespondtothenationalincomecomponents attributedtocapital(denominatorof ETRK ):corporateprofits;operatingsurplusofhouseholds(rents); andtheshareofmixed-incomeattributedtocapital.ThetoppanelsareforLMICs,whilethebottompanels areshown,ascomparison,forhigh-incomecountries(HICs).Seriesareweightedbycountries’national domesticproductin2010.Thetaxrevenuedatabetween1989-1993forformercommandeconomies(e.g. China,Russia)ismissing,andisimputedbyassigningthe1994values5yearsbackward.LMICsandHICs aredefinedaccordingtotheWorldBankincomeclassificationin2018.ThisfigureisdiscussedinSection 4.1

FigureA3:MechanismImpactsinTradeLiberalizationEventStudies

(a)Totaltaxes(%ofNDP)

Jointsignif.ofeventdummies: 1406 (.001)

(c)Corporateincome(%ofNDP)

Jointsignif.ofpost−eventdummies:

(b)Corp.incometaxrate(first-diff.)

Jointsignif.ofpost−eventdummies:

(d)Mixedincome(%ofNDP)

Jointsignif.ofpost−eventdummies:

(e)Corporate ETRK

(f)Capitalincome(%ofNDP)

Notes: Thesepanelsshowtheimpactsofthetradeliberalizationeventsontotaltaxescollectedandmechanism outcomes.ThepanelsareconstructedusingthemethodinSection 5.1,andsimilarlytoFigure 6.Across panels,theoutcomediffers:panela)istotaltaxrevenue,asapercentofnetdomesticproduct(NDP);panel b)isthefirst-differencedstatutorycorporateincometaxrate;panelc)isthecorporateincomeshareofnet domesticproduct,wherecorporateincomeisthesumofcorporateprofitsandemployeecompensation; paneld)isthemixedincomeshareofnetdomesticproduct;panele)istheaverageeffectivetaxrate oncorporateprofits;panelf)isthecapitalshareofnetdomesticproduct.Ineachpanel,thetop-left cornerreportstheF-statisticforthejointsignificanceofpost-eventdummies,withthep-valuereportedin parentheses.

TableA1:SyntheticDifference-in-DifferenceofTradeLiberalization

PanelA: Syntheticcontrolforeachoutcomeseparately

Post*Treat

Imputedtreatmenteffect

PanelB: Syntheticcontrolforalloutcomesjointly

Post*Treat

Imputedtreatmenteffect

PanelC: Donorpoolexcludingmajortradingpartners

Post*Treat

Imputedtreatmenteffect

PanelD: Donorpoolrestrictedtonot-yetliberalized Post*Treat

Imputedtreatmenteffect

PanelE: Donorpoolrestrictedtosameregion

Post*Treat

Imputedtreatmenteffect

PanelF: DonorpoolrestrictedtoLMICs

Post*Treat

Imputedtreatmenteffect

0.0640.045***0.020** (0.047)(0.015)(0.009)

0.070*0.047***0.020*** (0.039)(0.009)(0.005)

0.092*0.033*0.012 (0.044)(0.016)(0.008)

0.101***0.033***0.012*** (0.028)(0.006)(0.004)

0.0730.047***0.018** (0.055)(0.015)(0.008)

0.082**0.048***0.018*** (0.035)(0.009)(0.004)

0.0540.054***0.013 (0.058)(0.014)(0.008)

0.062*0.054***0.013*** (0.034)(0.009)(0.005)

0.0490.034*0.007 (0.060)(0.019)(0.008)

0.058*0.035***0.017*** (0.031)(0.012)(0.005)

0.0760.040**0.016* (0.052)(0.016)(0.009)

0.085**0.041***0.016*** (0.034)(0.008)(0.005) N 294294294

Notes: Thistableshowstheresultsfromestimatingthedifference-in-differenceeffectandthe imputedtreatmenteffect-seeAppendix C.2 fordetails.InPanelA,thesyntheticcontrolis createdseparatelyforeachoutcome(trade, ETRK , ETRL)andeachliberalizationcountryevent.InPanelB,thesyntheticcontroliscreatedforallthreeoutcomesjointlyforeachcountryevent.InPanelC,thedonorpoolforeachcountry-eventexcludesthe5majorimportand exporttradingpartnersofthecountry,measuredintermsoftotalvolumeoftradeintheyear immediatelyprecedingliberalization.InPanelD,thedonorpoolexcludesallcountriesthat havealreadyliberalizedbythetimeoftheevent (basedonWacziarg&Welch, 2008). InPanel E,thedonorpoolisrestrictedtocountriesinthesameregion.InPanelF,thedonorpoolisall lowandmiddle-incomecountries(LMICs),basedontheWorldBankincomeclassificationin 2018.*p<0.10**p<0.05***p<0.01. 4

WeakInstrumentsF-statistic

TableA2:First-StageandReducedFormRegressions

Sample

Developing

Developingand countriesonly developedcountries

Notes: Thisregressiontableshowsthefirststageandthereducedformresults.Thesampleisdevelopingcountries(N =49160)incols.(1)-(3),and developinganddevelopedcountries(N =6489)incolumns(4)-(7).Tradeisexportsandimportsdividedbynetdomesticproduct.Column(1) correspondstothefirst-stageindevelopingcountries,usedinTables 1-2-3.Columns(4)-(5)correspondtothefirst-stageinthefullsample,which estimatesheterogeneouseffectsbydevelopmentlevel,andwhichisusedinTable A7.Wereportseveral 1st-stagestatistics:theF-statisticofexcluded instruments;theSanderson-WindmeijermultivariateF-testofexcludedinstruments;and,theKleibergen-PaapF-statistic.Whenthereisonlyone endogenousregressor(column1),thesethreeF-statisticsareequivalent.Noteincolumns(4)-(5)thatthereisonlyoneKleibergen-PaapF-statistic, whichevaluatestheoverallstrengthofthefirst-stage,eventhoughtherearetwofirst-stageregressions.Columns(2)-(3)and(6)-(7)reportthereduced formregressionsoftheinstrumentsontheeffectivetaxratesforcapital, ETRK ,andlabor, ETRL.Developing(developed)countriesarelowand middle-incomecountries(high-incomecountries)accordingtotheWorldBankincomeclassificationin2018.*p<0.10**p<0.05***p<0.01.Standard errorsinparenthesesareclusteredatthecountrylevel.

TableA3:TradeImpactsonEffectiveTaxRatesinDifferentSamples

Samplechangesrelatedto

Samplechangesrelatedto Samplechangesrelatedto taxrevenuedata SystemNationalAccountsdata time-periodsandbalancedness

PanelA: ETR

PanelB: ETR

Modificationstobench-RemoveinterpolatedOnlyuseHAOnlyuseICTDOnlyuseOECDRemovecompositeOnlyuse Onlyuse Onlyuse OnlyuseFullybalanced marksampleinTable1

Notes: Thistablepresentsresultsfromestimatingtheeffectoftradeoneffectivetaxratesindifferentsamplesacrossdevelopingcountries.The estimationisidenticaltothebenchmarkIVmodelincolumn(2)ofTable 1;acrosscolumns,thesamplediffersfromthatbenchmarksample. Developingcountriesarelowandmiddle-incomecountriesaccordingtotheWorldBankincomeclassificationin2018.Theoutcomeistheeffective taxrateoncapital, ETRK ,inPanelAandtheeffectivetaxrateonlabor, ETRL,inPanelB.Tradeismeasuredasthesumofexportsandimports dividedbynetdomesticproduct(NDP).Inthefirstfourcolumns,sample-changesaremadetothetaxrevenuedata:interpolatedvaluesaredropped incolumn1;theonlydata-sourceishistoricalarchives(HA)incolumn2;theonlydata-sourceisICTDincolumn3;theonlydata-sourceisOECD incolumn4.Inthenextthreecolumns,sample-changesaremadetothesystemofnationalaccounts(SNA)data:incolumn(5),thecompositeSNA valuesareremoved;incolumn(6),onlydatafromSNA1968areused;incolumn(7),onlydatafromSNA2008areused.Inthefinalthreecolumns, sample-changesaremaderegardingbalancedness:incolumn(8),thequasi-panelbetween1965and1993isused;incolumn(9),thequasi-panel between1994and2018isused;incolumn(10),thefullybalancedpanelofcountriesbetween1965and2018isused.Formoredetailsonthe interpolations,imputationsanddata-sources,seeSection 3 andAppendix B.

TableA4:RobustnessofResultsforTotalTaxesandMechanisms

PanelA:Totaltaxes(%ofNDP)

PanelB:CITrate(first-diff.)

1

PanelC: log(1+CITrate)

1

PanelD:Corp.income(%ofNDP)

PanelE:Mixedincome(%ofNDP)

PanelF:CapitalshareofNDP

PanelG:Corp. ETR

ModificationstoIV

NDPInclude IncludeWinsorizeOnlyuseOnlyuse inPanelBofTable 3 weightscountry-year 1(oil-rich)*yeartrade Zgravity ZOil Dist controlsfixedeffectsat5%-95%instrumentinstrument

Notes: Thistablepresentsrobustnesschecksfortrade’simpactsonseveraloutcomesindevelopingcountries.Developingcountriesarelowandmiddle-incomecountriesaccordingtotheWorldBankincome classificationin2018.Tradeisthesumofexportsandimportsdividedbynetdomesticproduct(NDP).The outcomediffersacrosspanels,andthespecificationdiffersacrosscolumns:eachcellisthecoefficientfroma separateIVregression.Wereportthe 1st-stageKleibergen-PaapF-statisticseparatelyforeachIVregression. PanelAistotaltaxesasa%ofNDP.PanelBisthefirst-differencedcorporateincometax(CIT)rate.PanelC isthepercentchangefromlogof (1+ CITrate).PanelDisthecorporateincomeshareofNDP.PanelEis themixedincomeshareofNDP.PanelFisthecapitalshareofNDP.PanelGistheaverageeffectivetaxrate oncorporateprofits.ThedifferentspecificationsacrosscolumnsarethesameasinTable 1 -pleasereferto thattableformoredetails.*p<0.10**p<0.05***p<0.01.Standarderrorsinparenthesesareclusteredatthe countrylevel.

TableA5:ImpactsofTradeinLMICs,HeterogeneitybyEnforcementPolicy

PanelA:LargeTaxpayerUnit

Trade

Trade∗1(LTU)

0.116*0.0130.171*** 0.117* (0.066)(0.029)(0.057) (0.068)

0.0890.084** 0.019 0.113 (0.077)(0.040)(0.051) (0.131)

Impliedcoef.for 0.205***0.098***0.190*** 0.230** TradewithLTU (0.062)(0.029)(0.042) (0.097)

PanelB:Customs-TaxIntegration

Trade

Trade∗1(Customs-Tax)

0.121*0.0180.172*** 0.160* (0.064)(0.038)(0.052) (0.094)

0.2080.198* 0.046 0.183 (0.185)(0.109)(0.112) (0.249)

Impliedcoef.for 0.330**0.217**0.219** 0.344*

TradewithCustoms-Tax (0.153)(0.090)(0.089) (0.202)

PanelC:Value-AddedTax

Trade

Trade∗1(VAT)

0.116**0.0150.171*** 0.156* (0.058)(0.025)(0.054) (0.089)

0.1010.096** 0.022 0.085 (0.081)(0.043)(0.054) (0.115)

Impliedcoef.for 0.218***0.111***0.194*** 0.241*** TradewithVAT (0.064)(0.032)(0.045) (0.087)

PanelD:InternationalAccountingStandards

Trade

Trade∗1(IAS)

Impliedcoef.for

0.132**0.0230.160*** 0.183** (0.054)(0.022)(0.051) (0.088)

0.1220.111** 0.017 0.124 (0.087)(0.042)(0.055) (0.135)

0.255**0.134***0.177*** 0.307*** TradewithIAS (0.077)(0.036)(0.050) (0.110) N 49164916 4916 4916

Notes: ThistableestimatesheterogeneousIVeffectsoftradeindevelopingcountries(lowandmiddleincomecountriesaccordingtotheWorldBankincomeclassificationin2018).Tradeisthesumofexports andimportsdividedbynetdomesticproduct(NDP).Outcomesdifferacrosscolumns:column(1)isthe effectivetaxrateoncapital, ETRK ;column(2)istheeffectivetaxrateonlabor, ETRL;column(3)isthe corporateincomeshareofNDP;column(4)istheaverageeffectivetaxrateoncorporateprofits.Weestimate

where 1(A)ct isanindicatorvariablewhichtakesavalueof1inallyearsaftertheadministrativereformhas beenimplemented.Weinstrumentfor tradect and tradect 1(A)ct usingthetwoinstruments(Section 5.2). Thecoefficienton 1(A)ct isalsoestimated,butisnotreportedinthetable.InPanelA,theadministrative reformistheexistenceofalargetaxpayerunit(LTU);thisvariableiscodedbasedontheUSAID’s’Collecting TaxesDatabase’ (websitelink) andcountry-sources.InPanelB,theadministrativereformistheintegration ofthecustomsauthorityandthedomestictaxauthorityinasinglerevenueagency;thisvariableiscoded basedonUSAID’s’CollectingTaxesDatabase’ (websitelink),theOECDTaxAdministrationComparative Series (websitelink),andcountry-sources.InPanelC,theadministrativereformistheimplementationofa value-addedtax(VAT);thisvariableiscodedbasedonKeenandLockwood(2010)andcountry-sources.In PanelD,theadministrativereformistheadoptionofinternationalaccountingstandards(IAS);thisvariable iscodedbasedontheIAScountry-profiles (websitelink).Atthebottomofeachcolumnandpanel,we reporttheimpliedcoefficientandestimatedstandarderrorbasedonthelinearcombinationofthe tradect and tradect 1(A)ct coefficients.*p<0.10**p<0.05***p<0.01.Standarderrorsinparenthesesareclustered atthecountrylevel.

PanelA:ExcludingTrade-InducedTariffRevenueLoss Periods(basedonCageandGadenne,2018)

PanelB:ExcludingPeriodsofIndirectTaxRevenueLoss

PanelC:ExcludingPeriodsofTotalTaxRevenueLoss

Notes: ThisIVspecificationisthesameascolumn(2)inTable 1,butmodificationsaremadetothesample ofdevelopingcountries.InPanelA,weexcludeallcountry-yearobservationswhichbelongtoanepisode oftraderevenueloss,basedon CagéandGadenne(2018). Inadatasetof130countriesbetween1792and 2006,theauthorsdefinesuchanepisodebyafallintradetaxrevenuesasapercentageofGDPofatleast 1percentagepointfromalocalyearlymaximumtothenextlocalyearlyminimumthatisaccompanied byanon-decreaseinthevolumeofimportsasashareofGDP.InPanelsBandC,weconsideralternative definitionsofrevenuelossperiods.InPanelB,wecalculatethewithin-countryyearlychangeinindirect taxescollectedasashareofnetdomesticproduct(NDP),andtakethethree-yearmovingaverage.Wethen createtercilesofthisvariable,separatelyforeachcountry.Wedefineperiodsofindirecttaxrevenueloss tobetheobservationswhichlieinthebottomtercileofthisdistribution,andexcludethesecountry-year observationsfromthesample.InPanelC,wecalculatethesamerevenue-lossvariable,butbasedonchanges intotaltaxescollectedratherthanindirecttaxescollected.Tradeisthesumofexportsandimportsdivided byNDP.Theoutcomediffersacrosscolumns:column(1)istheeffectivetaxrateoncapital, ETRK ;column (2)istheeffectivetaxrateonlabor, ETRL;column(3)isthecorporateincomeshareofNDP;column(4)isthe averageeffectivetaxrateoncorporateprofits.*p<0.10**p<0.05***p<0.01.Standarderrorsinparentheses areclusteredatthecountrylevel.

TableA7:HeterogeneousImpactsofTradebyDevelopmentLevel

Trade∗1(High-inc.)-0.2930.014-0.064*-0.502**0.340**-0.312***-0.214**-0.289-0.197**-0.239** (0.215)(0.110)(0.033)(0.218)(0.138)(0.099)(0.114)(0.320)(0.086)(0.110)

Impliedcoef.for -0.0400.130-0.084***-0.2230.160-0.135*-0.1580.156-0.066-0.081

TradeinHigh-inc.(0.127)(0.095)(0.020)(0.154)(0.135)(0.072)(0.117)(0.173)(0.056)(0.081)

1st-stageKleibergen-15.3415.3415.3415.3415.3415.3415.3415.3415.3415.34 PappF-statistic

Notes: ThistablepresentsIVresultsfromestimatingtheeffectsoftradeon ETR andmechanismoutcomesinthefullsampleofdevelopingand developedcountries.Tradeismeasuredasthesumofexportsandimportsdividedbynetdomesticproduct(NDP).WerunthefollowingIV regression: yct = µ · tradect + κ · tradect · 1(HighIncome

Thefirst-stageregressionisreportedinTable A2.Atthebottomof eachcolumn,wereporttheimpliedcoefficientandestimatedstandarderrorbasedonthelinearcombinationofthe Trade andthe Trade ∗ 1(Highinc.) coefficients.High-incomeisbasedontheWorldBankincomeclassificationin2018.Wealsoreportthe 1st-stageKleibergen-PaapF-statistic. Eachcolumnisadifferentoutcome:column(1)istheeffectivetaxrateoncapital;column(2)istheeffectivetaxrateonlabor;column(3)isthe first-differencedstatutorycorporateincometaxrate;column(4)isthecorporateincomeshareofnetdomesticproduct,wherecorporateincomeis thesumofcorporateprofitsandcorporateemployeecompensation;column(5)isthemixedincomeshareofnetdomesticproduct;column(6)isthe corporateprofitshareofnetdomesticproduct;column(7)istheemployeecompensationshareofnetdomesticproduct;column(8)istheaverage effectivetaxrateoncorporateprofits;column(9)isthecapitalshareofnetdomesticproduct;column(10)isthecapitalshareofcorporateincome. Formoredetailsonoutcomes,seeSection 3.1 andSection 6.2.Formoredetailsontheinstrumentalvariables,seeSection 5.2.*p<0.10**p<0.05*** p<0.01.Standarderrorsinparenthesesareclusteredatthecountrylevel.

AppendixBData&ConstructionofEffectiveTaxRates

Thisappendixsectionprovidesanoverviewofthedatasourcesusedtocreateourtaxrevenueandnationalincomeseries(Section B.1).Additionally,wediscussthemethodology tomeasureeffectivetaxrates(Section B.2).

B.1Datasources

Taxrevenuedata Ourtaxrevenuedatadrawsfromthreekeysources:

(i) OECDGovernmentRevenueStatistics (websitelink):OECDrevenuestatisticstake precedenceinourdatahierarchyasitcontainsalltypesoftaxrevenuesalreadyarranged intheOECDtaxonomyoftaxes.WhileitcoversallOECDcountries,itonlycoversa subsetofdevelopingcountrieswhichtypicallystartintheearly2000s.

(ii) ICTDGovernmentRevenueDataset (websitelink):ICTDdatacoversmanydevelopingcountries,butonlybeginsinthe1980s.ICTDattimesdoesnotseparateincome taxesintopersonalvs.corporatetaxesandoftendoesnotcontainsocialsecuritycontributions.

(iii) Archivaldata:Themainarchivaldatacollectioncorrespondstothedigitizationofthe GovernmentDocumentssectionintheLamontLibraryatHarvardUniversity (website link).Foreachcountry,wescanned,tabulatedandharmonizedofficialdatafrom thepublicbudgetandnationalstatisticalyearbooks,toretrieveofficialtaxrevenue statistics.The supplementaryappendix liststhemainhistoricaldocumentsusedin eachcountry’stime-series.Inthecasewherethedocumentisastatisticalyearbook,the initiallistedsourceisalwaysareportproducedbythefinanceministryorthenational taxauthority.Tocomplementhard-copyarchivaldata,weretrievedcountries’online reports,usuallypublishedbytheirnationalstatisticalofficeorfinanceministry.Wealso usedcomplementarysources,includingofflinearchivalGovernmentFinanceStatistics datafromtheIMFwhichcoverstheperiod1972-1989.Forsocialsecuritycontributions, wereliedontwoadditionalsources:the‘D61’statisticonsocialcontributionsin thehouseholdsectorinSNA-1968andSNA-2008,anddatafrom Fisunoglu,Kang, Arbetman-Rabinowitz,andKugler(2011).

Toincreasethecredibilityofthetaxrevenueseriesbasedonnewlydigitizedhistorical documents,webaseourapproachonthefollowingfourguidingrules:

1. Weseektobuildlongtime-seriesfromthearchivalrecordsinordertooverlapwith pre-existingsources(OECD,ICTD,IMF).Weusetheoverlappingyearstoinspectthat thedifferentsourcesprovidesimilarestimatesoftheoveralllevelsoftaxescollectedand toverifythattheyreportthesamesetoftaxesinplace.Ifdiscrepanciesexistwhendata sourcesoverlap,weinspecttheaccuracyofeachsourcewithadditionalinformation. Forthisreason,switchesindata-sourcerarelyleadtoasignificantchangeintrend.

2. Inhistoricaltime-periodswherenooverlapexistswithpre-existingsources,wefind academicpublicationsandpolicyreportstocomparetheestimatedoveralllevelsof

tax/GDP.Whendiscrepanciesexist,weinvestigateitscauses(e.g.inclusionofnon-tax revenues,differencesinestimatedGDPnumbers).

3. Wetakenoteofinstanceswheretheoveralltaxtake,orindividualtaxtypes,seesudden andlargechanges.Weuseadditionalsourcestotrytodeterminetheproximatecauses astheyrelatetopolicychanges,politicaltransitionsoreconomicshocks.Weflagcases wherewecannotfindtheproximatecauseorwherethepoliticaloreconomicevents induceverysignificantvolatilityinthetime-series.

4. Weaimtobeconservativeinourinclusionofcountriesandtime-periods.Specifically, weexcludecountriesintime-periodswheredataexistsbutwheresignificantconcerns remainaboutitsreliability(andwhereitprovesdifficulttofindcorroboratingsources). Theseinstancesareofteninperiodsofsignificantpoliticaloreconomicchange.For example,weexcludeAfghanistaninthelate1970sandearly1980s;Cambodiainthe late1980sandearly1990s;DominicanRepublicintheearly1960s;and,Namibiain 1990.

The supplementaryappendix containsatablewhichsummarizesourdecisionsasthey relatetothesefourguidingrulesineachcountryinoursample.Thetableemphasizesthe uncertaintythatexistsforspecificcountriesinspecifictimeperiodsandweflaginstances whereweassessthedatatobeworthyofinclusionbutwhereitshouldstillbeinterpreted withcautionandadditionalinvestigationswouldbehelpful.Weconfirmthatnoneofour mainresultschangeifweexcludetheseflaggedinstances.Moreover,the supplementary appendix providescase-studieswithadditionaldetailsonourdecisionsanddirectlinks totheinitialhistoricaldocumentsforeachcountry.Thecasestudiesarecurrentlylimited to67countriesbutwillultimatelycovertheentiresample.63

Equippedwiththehistoricaltimeseries,wehavetoconstructlong-runpanelsacross sources.Below,weoutlinetheinstructionsusedtoharmonizeacrosssourcesandto improvedataqualityforthemeasurementofeachtypeoftax.Weflaginstanceswherewe considertheseriestobelegitimate,butwhereharmonizationprovedmorechallenging duetocoincidingeconomicorpoliticalchanges.Foreachcountry,themaindecisions relatedtoharmonizationanddata-qualityareprovidedinthe supplementaryappendix

1. WefirstrelyonOECDdatawheneveritexists.Archivaldataisinitiallysecondin priority,butwerevisethisbasedonwhetherICTDdataprovidesalongtimeseriesand separatespersonalfromcorporateincometaxes.WealsostudyifICTDhasthebetter matchinoverlappingtime-periodswithOECDdata.Whenpossible,weaimtouseno morethantwodatasourcespercountry.

2. Weexcludecountry-yearsforcommunist/commandeconomies.Thisimpliesthatour panelsizejumpsin1994,includingwhenChinaandRussiafirstappear.Theyear1994 isafewyearsremovedfromthedissolutionoftheSovietUnionbut,asdiscussedbelow, arguablycorrespondstoChina’sestablishmentofamoderntaxsystem (WorldBank, 2008).

63Weinvitecommentsfromresearcherstoimprovetheaccuracyoftheseriesaswebuildthecasestudies andexpandthedatatorecentyears.

3. WhennoneofthedatasourcesseparatePITfromCIT,weuseacademicsourcesand taxlegislationtoassignvalues.

4. Toguardagainstomittingsignificantvaluesofdecentralizedtaxrevenues,weuse theOECDdatabaseonsubnationalgovernmentfinance(link)tofindthecountries withsignificantstateandlocaltaxes,andweattempttocollectfurtherdataforthese countriesifnecessary.

5. Welinearlyinterpolatedatawhenagiventaxtypeismissing,butfornomorethan 4yearsinatime-seriesandwithoutextrapolation.Wecheckforsignificantsocioeconomicchangesthatcouldcastdoubtonthecontinuityofthetaxrevenueseriesand donotinterpolateinsuchyears.

6. Weonlyuseactualamountsoftaxescollected,anddonotrelyonestimatedvalues.

China’sestablishmentofamoderntaxsystemin1994 Inourbenchmarksetting,weonlyincludeformerlycommunisteconomiesinto ourdatastartingin1994.GivenChina’sweightintheglobaleconomy,itisworth reviewingthereasonforthatchoice.ThetaxrevenuedataforChinacoversmost ofoursampleperiodalthoughitsqualityimprovesmarkedlyinthe1980s.Official statisticsareavailableonline: linkhere

Priortothe1980s,Chinahadacommandeconomymodelof‘profitdelivery,’in whichthestatedirectlyreceivedtherevenuesofprofitableSOEs,andsubsidized unprofitableones.AcorporateincometaxfirstappearsinChinain1983-84,butthe majorityofthebasecontinuestobestate-ownedenterprises.In1985,thetaxsystem wasfurtherreformedintoa‘fiscalcontracting’systemwherebyfirmsnegotiateda fixedlump-sumpayment(regardlessofeconomicoutcomes),whichcannotbesplit intolaborversuscapitaltaxes(norintoconsumptiontaxes).Wethereforeexclude the‘pseudo’-CITrevenuedatingfrom1985through1993.

Rather,weconsiderthatChina’smoderntaxsystembeganin1994.The World Bank(2008) showsthat,in1994,Chinaestablishedforthefirsttimeacentraltax administration;reformedthe‘fiscalcontracting’system;unifiedthePIT;createda VAT;andreduced‘extrabudgetary’(non-tax)revenues.Thusfrom1994onward wecancategorizetaxrevenuepreciselybytype,assignthemtocapitalorlabor, andestimateour ETRs.

Nationalaccountsdata Tocomputefactorincomesofnetdomesticproduct,wecombine twomaindatasetsfromtheUnitedNationsStatisticsDivision.Thefirstisthe2008System ofNationalAccounts(SNA)onlinedatarepository.Thesecondisthe1968SNAarchival material.The2008and1968SNAsinitiallyhavedifferentreportingclassifications;tothe bestofourknowledge,ourprojectisthefirsttoharmonizenationalaccountsacrossthese twosources.

Toestimatecapitalandlaborfactorincomesrequiresinformationonthe4mainsubcomponentsthatmakeupnetdomesticproduct(seeequation 3).However,insome

country-yearswherewehaveinformationondomesticproductfromanSNAdataset,there maynotbedataonallfoursub-componentsatthesametime.Thisismorefrequently thecaseforthe1968SNAthanforthe2008SNAanditismostfrequentformixed income(OSPUE ).Inthesecases,wefirstattempttorecoverthevalueofthemissing componentusingdatafromtheotherSNAdatasetandnationalaccountingidentities withnon-missingvaluesforothercomponentswithinthesamecountry-year.Forthe remainingcasesafterapplyingthisprocess,weimputevaluesforthecomponent.Allof theregressionsinSections 5-6 includedummyvariablesforthesecompositecases;our mainresultsalsoholdwithouttheimputedvalues(Table A3).Fortheimputation,we followtheprocedurefrom Blanchetetal.(2021). TheWorldInequalityDatabaseuses thisproceduretoimputeconsumptionoffixedcapital(depreciation)whenitismissing incountries’series.Forexample,applyingthisprocedureinoursettingmeansthatwe model OSPUE asafunctionoflognationalincomepercapita,afixedcountrycharacteristic, andanAR(1)persistenceterm.

Table B1 summarizesthenationalaccountscoverageinourdataset.The’Complete SNA2008’rowreferstocountry-yearswhereallcomponentsofnetdomesticproductare extractedfromthe2008SNA;similarlyforthe’CompleteSNA1968’row.The’Composite’ rowcountsinstanceswhereonecomponent(ormore)ofnetdomesticproductisinitially missingfromanSNAdatasetandisretrievedfromtheotherSNAdataset,iscalculated viaaccountingidentities,orisimputed.

PanelA:Taxrevenuedata

PanelB:Factorincomedata

Notes: SeeSection B.1 formoredetailsonthedata-sourcesfortaxrevenueandfactorincome.

TableB1:MainDataSources

B.2Constructionof ETR

Bycombiningdataondisaggregatedtaxrevenuesandnationalincomecomponents,we constructeffectivetaxratesoncapitalandlabor(equations 1 and 2 inSection 3.1).Herewe providefurtherdetailsonthedefinitionsof ETR.Computing ETRL and ETRK requires thefollowinginformationforcountry c inyear t:

Foreachtypeoftax j,thereisa λj,ct allocationofthetaxtolaborwhichmayvaryby country-year(and 1 λj,ct istheallocationtocapital).Theallocationforeachtypeoftax isdescribedinTable B2,wherethetypesoftaxesfollowtheOECDclassification.Inour benchmarkassignment,theseallocationsaretime-andcountry-invariantforalltypesof taxes,exceptforpersonalincometaxes(λPIT,ct)whichwediscussindetailbelow.Further, inourbenchmarkassumption,weassumethatthelaborshareofmixedincome, ϕct,is fixedat75%inallcountry-years(ϕct =0 75).Inrobustnesschecks,welet ϕct varyatthe country-level,basedon ILO(2019), oratthecountry-yearlevelbyusingthelaborshare inthecorporatesector.Inourbenchmarkassignment,replacingtheinvariantparameters withtheirfixednumericalvalues,wethereforehave:

ETRL,ct = TL,ct YL,ct = λPIT,ct T1100,ct + T2000,ct CEct +0.75 · OSPUE,ct

ETRK,ct = TK,ct YK,ct = (1 λPIT,ct) ·

TheparametervaluesaredescribedinTable B2,bothforthetaxrevenuenumerator andthenationalincomedenominator.Wenowprovidemoredetailson λPIT and ϕ Laborshareofpersonalincometaxes: λPIT AsdiscussedinSection 3.1,thelevelof personalincometax(PIT)thatderivesfromcapitalversuslaborincomeisrarelydirectly observed.64 Thus,withinPIT,animportantparameteristheshareofrevenueassigned tolabor,denoted λPIT .IntheUnitedStates, Pikettyetal.(2018) findthatapproximately 85%ofPITrevenueisfromlaborand15%fromcapital.Toconstructcountry-yearspecific λPIT,ct,westartfromtheUSbenchmark(λPIT =85%)andmaketwoadjustments:

(a) First,thelocationofthePITexemptionthresholdintheincomedistributionimpacts λPIT ,sincethecapitalincomeshareishigherforricherindividuals.WeretrievePIT exemptionthresholdsfrom Jensen(2022). WeassumecountrieswithahigherPIT exemptionthresholdhaveahigher λPIT .SincetheUShasalowexemptionthreshold

64PITrevenuefromcapitalincomeincludestaxesondividendsandcapitalgainsandonthecapitalshareof self-employmentincome.OECDrevenuedataoccasionallyreportstaxrevenuefromcapitalgains,which wasonaverage4%ofPITintheperiod2010-2018(7.5%intheUS).

with λPIT =85%,weassign85%ofPITtolaborincountrieswherethePITatleast halfoftheworkforce(mainlyhigh-incomecountries).ForcountrieswherethePIT covers1%orlessoftheworkforce(lowest-incomecountries),weassignamaximum PITcapitalshareof30%.ForPITthresholdswithacoveragebetween1%to50%of theworkforce,welinearlyassign λPIT between70%and85%.

(b) Second,weassumethatcountrieswhereadualPITsystemisinplacehavealarger λPIT .DualPITsystemssetcapitalincometaxationtoalower—oftenflat—rate,while laborincomeistaxedwithprogressivemarginaltaxrates.Wecomputethemeasure ofthepercentdifferencebetweenthetaxrateondividendsandthetopmarginaltax rateonlaborincome.Dataondividendvswageincometaxratesaretakenfrom OECDRevenueStatisticsandcountry-specifictaxcodedocuments.Sinceweonly havedividendrates,weassumethat50%ofcapitalincomeinPITbenefitsfromthe lowerrate(e.g.,capitalgainsmightnotbenefit).Forthis50%,wemultiply λPIT by thepercentdifferenceindividendversustopmarginaltaxrates.

Laborshareofmixedincome: ϕ Section 3.1 notedthedifficultyofestimatingthelabor shareofmixedincome(unincorporatedenterprises).Weassumeabenchmarkmeasureof ϕ =75%.Theimpliedcapitalshareislowerthanthe30%usedinDistributionalNational Accountsguidelines (Blanchetetal., 2021). However,sincetheglobalaveragecorporate capitalshareis27%,assumingthatthecapitalshareofunincorporatedenterprisesis slightlylowerappearsreasonable (seeGuerriero, 2019).

Weimplementtworobustnesschecks.First,wesetthelaborshareofmixedincomeequaltothatofthecorporatesectoratthecountry-yearlevel;specifically, ϕct = CEct CEct+OSCORP,ct .Thisprocedurefollows Gollin(2002).

Second,weimplementthe ILO(2019) methodwhichreliesonharmonizedhousehold surveysandlaborforcesurveysindevelopingcountriesbetween2004and2017.Estimationoftherelativelaborincomeofself-employedisbasedontheobservablecharacteristics ofthoseworkersandtheircomparisonwithemployees.Relevantvariables,includingindustry,occupation,educationlevelandage,areusedinaregressiontouncoverthe determinantsoflaborincomeofemployees.Giventheestimatedrelationshipbetween employeelaborincomeandtheexplanatoryvariables,laborincomeisextrapolatedto self-employed,generatingacoefficientofrelativeearningstoemployees,denoted γq.The methodestimatesaseparate γq fordifferentgroups q ofself-employed:self-employed workers;own-accountworkers;and,contributingfamilymembers.Acorrectionprocedureisimplementedtoreducethebiasfromselectionintoself-employment.Totallabor incomeinagivencountry-yearisthendeterminedas Y ILO L = CE + q wemp · γq · bq,where CE isthetotalcompensationofemployeesinSNA, wemp istheaverageemployeewage (whichrelates CE tothetotalemployeeworkforce), bq isself-employedgroup q’scountin theworkforce,and γq isthe q-specificearningscoefficientrelativetotheaverageemployee wage.Equippedwiththe Y ILO L estimate,wecalculatethe‘implicit’labormixedincome (OSPUEL)asthedifferencebetween Y ILO L andthevalueofcompensationforemployees CE observedinthenationalaccounts.Then,wecomputethemixedincomeshare allocatedtolabor.Specifically, ϕILO iscomputedasfollows: ϕILO = (Y ILO L CE) OSPUE = OSPUEILO L OSPUE

Finally,wecomputetheaverage ϕILO foreachcountryduring2004-2017andassignthis valuetoallyears.Weassignacountry-specificbuttime-invariantvaluefortworeasons. First,priorto2004,theILOlackstherequireddatatocompute Y ILO L onacountry-year basis.Second,whenmeasuredatthecountry-yearlevelduringthe2004-2017period, ϕILO varieslittlewithincountryacrossyears.Assigningacountry-specificbuttime-invariant mixedincomefactorsharemaythereforebereasonable.

Themainchallengeisthattheestimationframeworkfor γq isnotdisciplinedbythe country’sactualvaluesinSNA.Inparticular,nothingprevents q wemp γq bq >OSPUE -suchthatestimatedlabormixedincomeislargerthantheSNAactuallyobservedentire mixedincome.Thiswould,implausibly,implythat ϕILO > 100%.Toremedythisconcern, wewinsorize ϕILO at100%.Incaseswhere γq and bq arenotfrom ILO(2019), wealso winsorize ϕILO frombelowwiththelowestobservedcountryvaluein ILO(2019), whichis 36%.Whilethe ILO(2019) methodgeneratesimportantcountry-levelvariation,theglobal averagevaluefor ϕILO,at80%,doesnotdiffermuchfromourbenchmarkvalue ϕ =75%.

MixedincomeinChinaandtheUS Wemakemixed-incomeadjustmenttothebenchmarkseriesforChinaandtheUnitedStates.ForChina, Piketty,Yang,andZucman(2019) (PYZ)showthatChinesenationalaccountssystematicallyunderestimatemixedincome andoverestimateotherfactorincomes:forexample,theincomeofself-employedagriculturalworkersisattributedtoemployeecompensationintheSNA2008dataandnotto mixedincome(asinothercountries).WebaseourmixedincomeseriesonPYZ.

FollowingPYZ,wedefinemixedincomeasthesumoftheincomeattributedtoselfemployedworkersfromagricultureandindividualbusinesses.PYZcoverstheperiod 1992-2014.Foryearsbeforeandafter,weextendtheseriesasfollows:

(a) Foragriculture,relevantdataisavailabledatingbackto1952.Weextendtheseries backto1965relyingonthepricedeflatoravailableatWorldInequalityDatabase. Formorerecentyears(2014-2018),wepredictthetrendbasedonsourcesusedin PYZ(NationalBureauofStatistics, link).

(b) Forindividualbusinesses,PYZcomputestheincomeofthissectorbycombining severaldatasources.Unfortunately,acrucialpartofitisnotavailablepriorto1992, namelythe’flowoffunds’data.Instead,ourassumptionisthat,priorto1980, Chineseindividualbusinessesaccountedforanegligibleshareoftheeconomy.This observationisconsistentwithfactsonself-employmentstructureinChinaatthe microandmacrolevels,andthetrendspresentedinPYZforthe1990s.65 Forrecent years(2014-2018),wepredictthetrendbasedonsourcesusedinPYZ(National BureauofStatistics, link).

TheestimatedseriesofmixedincomeinChinafollowsthesametrendasfortherestof LMICs,althoughitstartsfromaslightlyhigherinitiallevel.

FortheUS,weusethefactorsharesfrom Pikettyetal.(2018), which(i)assumesa highercapitalshareofincomeforpartnershipsvs.othernon-corporatebusinesses;and (ii)accountsfortherisingcapitalintensityofpartnershipssincethe1980s.

65Atthemicrolevel,self-employedworkersrepresentlessthan2%ofworkforceinthe1980s,buthadsimilar incomepercapitaaswageearners(Gustafsson&Zhang,2022).Atthemacrolevel,verysmall-scale industriesrepresented0.4%ofindustryoutputinthe1970s,reaching7%onlyin1989(Yusuf,1994).

PanelA:TaxRevenue

TableB2:MainTaxRevenueandNationalAccountsConcepts

6000 othertaxes excluded

Taxesonindividuals(wages,capitalincome,capitalgains). λPIT,ct variesbycountryand year:seeSectionB.2fordetails

Taxesoncorporateprofits.Unallocableincometaxes(OECDcategory1300)aresplitbetween PITandCITbasedoninformationfromadditionalsources(seesupplementaryappendix)

Includesallsocialsecuritycontributionsaswellaspayrolltaxes

Includesproperty,wealthandfinancialtransactiontaxes

Includestradetaxes,value-addedtaxesandothersalestaxesandexcisetaxes.Weconsider thesetaxesaspriortofactorincomereturns,suchthattheycanbeexcludedfromfactor incometaxation(Browning,1978;SaezandZucman,2019).

Rareinoccurrenceandoftenquantitativelysmall

7000 non-taxrevenue excluded Doesnotmeetdefinitionoftaxation,canbequantitativelysignificant

PanelB:NationalAccounts

Natl.accounts

OSHH imputedrent capital

OSCORP corporateprofits capital

OSGOV governmentoperatingsurplus

Includeswagesandsalaries,employerandemployeesocialcontributions,andallpayments fromemployerstotheiremployees

‘Operatingsurplusofprivateunincorporatedenterprises’includesincomefromselfemployment,householdbusinessowners,andinformalorunincorporatedenterprises

‘Operatingsurplusofhouseholds’isimputedrentalincomeaccruingtohomeownerswho liveintheirownhome

‘Operatingsurplusofcorporations’includesallcorporateincomeafterpayingemployees andexpenses,andcanbethoughtofascorporate-sectorcapitalincome

OSGOV =0,byconstructioninnationalaccounts

NIT netindirecttaxes excluded ‘indirecttaxes,netofsubsidies’usuallycomprise8-15%ofnationalincome.

NFI netforeignincome

Wetreatdomesticincomewithoutbalancingtheaccountstoforeignearnedincome:many countriestaxincomeearneddomestically,regardlessofcitizenship,whereasnetforeign incomeistaxedonlywithdifficulty

CFC depreciation excluded Factorincomeandour ETR areexpressednetof‘consumptionoffixedcapital’

Notes: Thesegraphsprovideacomparisonofour ETR estimationswiththerecentliterature. Theleft-handgraphcomparesourestimationswith KostarakosandVarthalitis(2020), based onEU-27membersfrom1995to2019.Theright-handgraphcomparesourestimationswith theupdateddatasetinMcDaniel(2020)thatincludes30OECDcountriesfrom1995to2018. Thisextensionisbasedon McDaniel(2007) (Table B3),andcoversthelargestOECDcountries, includingtheUS,aswellasMexicoandTurkey.Thesolidlinerepresentstheresultsusing our ETR measuresandweights,butbasedontheexactcountrysamplesintherespective studies.Thelong-dashlinereplicatesthe ETR measuresfromthetwostudies.Theshort-dash lineextendstheir ETR seriesbutusingourcountry-yearweights.Foradiscussionofthe differencesbetweenseries,seeSection 4.2,Table B3 andthe supplementaryappendix.

TableB3:EffectiveTaxRates:ExistingDatabases

Mendozaetal(1994) 1965-1988 G7membersOECD

CareyandRabesona(2004) 1975-2000 25OECDbiggest members OECD

McDaniel(2007) (McDaniel2020) 1950-2003 (updated:1995-2018) 15OECD biggestmembers (updated30OECD biggestmembers) OECD

Difference:Allmixedincomeisallocatedtocapitalincome. Difference:LaborandcapitalinthePITaretaxedatthesamerate

Difference:Mixedincomeallocationwhereself-employedpay themselvestheannualsalaryearnedbytheaverageemployee.

Similarity:LaborandcapitalinPITarenottaxedatsamerate,measure preferentialtaxtreatmentofpensionfundsanddividends.

Difference:Socialsecuritycontributionsdeductedfromhouseholdincome.

Difference:Mixedincomeimputedtocapitalbasedonrest-of-economyshare. Difference:LaborandcapitalinPITaretaxedatthesamerate

KostarakosandVarthalitis (2020) 1995-2019 EU-27membersEurostat FollowsCareyandRabesona(2004)

AppendixCTradeLiberalizationEventStudies

C.1Descriptionofliberalizationevents

Ourselectionoftradeeventsisdeterminedbythreecriteria.First,theeventisrelated tomeasurablepolicyreforms;thisimprovesthetransparencyoftheevent-studydesign whichisbasedonawell-definedpolicyevent.Second,thepolicyreformsinduced largechangesintradebarriers;thisincreasesthelikelihoodofobservingsharpbreaksin macroeconomicoutcomesaroundtheevent-time.Third,theeventhasbeenstudiedin academicpublications;thisallowsustorelyoneventsforwhichthepositiveeffectson opennesshavepreviouslybeenestablished.

Thesecriterialedustofocusonthesixtradeliberalizationeventsreferencedinreview articlesby GoldbergandPavcnik(2007, 2016) towhichweaddChina’sWTOaccession event (studiedinBrandtetal., 2017). Mostoftheseselectedeventsfeaturereductionsin tariffrates:manyofthecountriesdidnotparticipateintheearlyGATT/WTOnegotiation rounds,makingreductionsintariffsanavailablepolicylever.Thetariffreductionswere large:Brazilcuttariffratesfrom59%to15%,Indiafrom80%to39%percent,andChina from48%to20%.Mexicoreducedtariffratesfrom24%to12%andimportlicense requirementswentfromcovering93%ofnationalproductionto25%;Colombia’stariffs werereducedfrom27%to10%andimportrequirementsdroppedfrom72%ofnational productioncoverageto1%.Intheselectedcountries,“tariffreductionsconstituteabig partoftheglobalizationprocess” (Goldberg&Pavcnik, 2016). Thetimingoftheevents andacademicreferencesareprovidedinthe supplementaryappendix. Belowarenarrativeanalysesforsomeoftheevents:

• Brazil Theliberalizationeventof1988isdetailedinDix-CarneiroandKovak(2017). Theauthorsnote:“Inanefforttoincreasetransparencyintradepolicy,thegovernment reducedtariffredundancybycuttingnominaltariffs...Liberalizationeffectivelybegan whenthenewlyelectedadministrationsuddenlyandunexpectedlyabolishedthelist ofsuspendedimportlicensesandremovednearlyallspecialcustomsregimes.”

• Colombia SimilarlytoBrazil,tariffreductionsinColombiain1985weredrivenby thecountry’sdecisiontoimposeuniformratesacrossproductsandindustriesunder thenegotiationcommitmentstotheWTO. GoldbergandPavcnik(2007) notethatthis reformobjectivemakes“theendogeneityoftradepolicychangeslesspronouncedhere [inColombia]thaninotherstudies.”

• China Brandtetal.(2017) notethattradeopennessreformshadgraduallybeenimplementedinChinapriortothecountry’sWTOaccessionin2001,butthatthetariff reductionsimplementeduponaccessionwerelarge,“lessvoluntary”andlargelycompliedwiththepre-specifiedWTOaccessionagreements.Importantly,thepotential accessiontoWTOcontributedtothetimingofprivatizationinitiatives,inwhichthe Chinesegovernmentrestructuredandreduceditsownershipinstate-ownedenterprises.Whiletheprivatizationeffortsbeganin1995andwereincremental,itispossible thatadditionalsell-offsinthepost-WTOyearscontributetotheobservedmedium-run trendsinouroutcomes.

• India The1991eventinIndiaoccurredasaresultofanIMFinterventionthatdictated thepaceandscopeoftheliberalizationreforms.UndertheIMFprogram,tariffrates hadtobeharmonizedacrossindustries,which,likeinBrazilandColombia,ledtoa largeaveragereductionintariffs.TopalovaandKhandelwal(2011)arguetheIndian reform“cameasasurprise”and“wasunanticipatedbyfirmsinIndia.”Thereforms wereimplementedquickly“asasortofshocktherapywithlittledebateoranalysis.” TheIMFprogramwasinresponsetoasetofeventsincluding“thedropinremittances fromIndianworkersintheMiddleEast,theincreaseinoilpricesduetotheGulfWar, andpoliticaluncertaintyfollowingtheassassinationofRajivGandhi”.

• Vietnam The2001reformwasimplementedasabroadtradeagreementthatdidnot involvenegotiationsoverspecifictariffs (McCaig&Pavcnik, 2018). Thereformwas drivenbytheAmericangovernment’sdecisiontoreclassifyVietnamfrom’Column2’ oftheUStariffscheduleto’NormalTradeRelations’.Column2wasdesignedinthe early1950sforthe21communistcountries,includingVietnam,withwhomtheUSdid nothavenormaltradingrelations.

Thesedescriptionsofreformtimingdonotsuggestthattheliberalizationeventswere directlytriggeredbychangesindomestictaxationorfactorincomes.

GoldbergandPavcnik(2007) noteothercross-borderreformsthatoccurredduring post-yearsoftheliberalizationevents.Argentina’s1989eventandBrazil’s1988event werefollowedbyaccessiontoMercosurin1991;India’s1991eventwasfollowedby foreigndirectinvestmentliberalizationin1993;andMexico’s1985WTOaccessionwas followedbyaremovalofcapitalinflowrestrictionsin1989.Thesereformsoccurredwith somelagtothetradeliberalizationevents.

C.2Eventstudymethodology

Oursampleisconstructedbyapplyingasyntheticmatchingproceduretoeverytreated countryforeachoutcomeofinterest.Thedonorpoolhastobefullybalancedinallpreeventperiods.Toestimatetheeventstudyinequation(4)foragivenoutcome,thesample poolstheseventreatedcountriesandtheirsyntheticcontrolcountriesfor10yearsbefore andaftertheevents(yielding294observations).Weestimatetheevent-studyinequation 4 andtheDiDmodel: yct = βDiD ·1(e ≥ 0)t ·Dc + θt + κc + πYear(t) + ϵct.TheDiDmodeluses thesamenotationasequation(4).Moreover,weusetheimputationmethodby Borusyak etal.(2021) toreportaveragetreatmenteffectscomparableto βDiD withatechniquethat dealswithissueswithtwo-wayfixedeffectsandheterogeneouseventtiming.Details areprovidedinthe supplementaryappendix.AlltheDiDaveragetreatmenteffectsare reportedinTable A1.Wetestifourresultsholdwithamorerestrictivesyntheticcontrol, byusingourthreemainoutcomes—trade, ETRK and ETRL—toconstructonesynthetic controlgrouppertreatedcountry.TheresultsarereportedinPanelBofTable A1.

C.3Alternativetradeliberalizationeventstudy

Wepresentresultsbasedonanalternativemeasureoftradeliberalizationevents.We usetheeventsfrom WacziargandWelch(2008), whichcover141countriesatalllevelsof developmentbetweenthe1950sand1998.Whenmergedwithourdata,thesamplecovers

68liberalizationeventsthatoccurredbetween1965and1998indevelopingcountries.A tradeliberalizationeventisdefinedtooccurwhenallfiveofthefollowingconditionsno longerhold:(i)averagetariffratesareabove40%;(ii)non-tariffbarrierscoveratleast40% oftrade;(iii)theblackmarketexchangerateisatleast20%lowerthantheofficialexchange rate;(iv)thereisastatemonopolyonmajorexports;(v)thereisasocialisticsystemin place.Theseconditionsarebroaderthanourmainliberalizationeventcriteria(Section 5.1 and C.1).Atthesametime,ourmaineventsarecoveredinthisexpandedeventsample (withtheexceptionofChinaandVietnam,whoseeventsareaftertheendofthesample period);thisoccursbecausethereductionintariffrates,oneofourmaineventcriteria,was theremainingevent-conditiontobesatisfiedin WacziargandWelch(2008). Weestimate theeffectsoftheliberalizationeventsusingtheDiDmodel: yct = βDiD · Ect + θ

yct istheoutcomeofinterestincountry c inyear t, Ect istheeventindicatorwhichtakes onavalueof1inallperiodsafteracountryhasaliberalizationevent(and0otherwise), and θt and θc areyearandcountryfixedeffects,respectively. ϵct isclusteredatthecountry level.Estimationissuesarisingfromheterogeneoustreatment-timingmaybeimportant; forthisreason,wefocusontheimputedtreatmenteffectsbasedon Borusyaketal.(2021). Werestrictthesampletodevelopingcountriesbetween1965and2008.

PanelAofTableC1reportsthe βDiD impactsontrade, ETRK and ETRL.Despitebeing basedonbroadercriteria,thetradeliberalizationeventsproducequalitativelysimilar resultstothemainevent-study(Section 5.1),withpositiveimpactsonopennessandboth ETRs,andalargermagnitude-impacton ETRK than ETRL.Figure C1 estimatesthe dynamicevent-study.Liberalizedandcontrolcountriesareonparalleltrendsuntilthe eventonset;both ETRsstarttoincreaseintheimmediatepost-eventyears.PanelBshows thattheresultsarerobusttoestimatingtheeffectsinafullybalancedpanel10-years post-reform.InPanelC,theresultsholdwhenthecontrolgroupisformedwithin-region. PanelDshowstheresultsarerobusttoexcludingcountrieswhichhavecross-border capitalliberalizationeventsatanypointduringthesample-period(Bekaert,Harveyand Lundblad,2000).Finally,PanelEshowstheresultsholdwhenweexcludecountrieswith concurrentdomesticreforms (Wacziarg&Wallack, 2004).

FigureC1:Event-StudyofTradeLiberalizationBasedonWacziarg&Welch(2008)

(a)Effectivetaxrateoncapital

(b)Effectivetaxrateonlabor

Notes: Thesegraphsshowevent-studyimpactsofthetradeliberalizationeventsfrom Wacziarg andWelch(2008) on ETRK (leftpanel)and ETRL (rightpanel).

TableC1:TradeLiberalizationEvent-StudyBasedonWacziarg&Welch(2008)

Trade ETRK ETRL (1)(2) (3)

PanelA: Benchmark

Post*Treat

Imputedtreatmenteffect

0.0300.0210.006 (0.048)(0.017)(0.006)

0.090*0.043**0.021*** (0.049)(0.016)(0.005)

N 403240324032

PanelB: Fullybalancedpanel,10-yearpost-reform

Imputedtreatmenteffect

0.110**0.031**0.018*** (0.054)(0.014)(0.005)

N 308230823082

PanelC: Withregion-yearfixedeffects

Imputedtreatmenteffect

0.084**0.042**0.021*** (0.041)(0.016)(0.005)

N 403240324032

PanelD: Excludingcountrieswithcapitalliberalization

Imputedtreatmenteffect

0.101*0.028*0.014** (0.057)(0.017)(0.006)

N 265126512651

PanelE: Excludingcountrieswithdomesticreforms

Imputedtreatmenteffect

0.0560.040**0.015*** (0.051)(0.016)(0.005)

N 355135513551

Notes: Thistableshowstheresultsfromestimatingthedifference-in-differenceregressionand theimputedtreatmenteffectofthe68tradeliberalizationeventsfrom WacziargandWelch (2008), between1965and2008.Thesampleislowandmiddle-incomecountries,basedonthe WorldBankincomeclassificationin2018.InPanelA,thepost*treatcoefficientcorrespondsto the βDiD basedonestimatingtheequationinSectionC.3.Theimputedtreatmenteffectisbased onthemethodin Borusyak,Jaravel,andSpiess(2021). InPanelB,thesampleisrestrictedto thefullybalancedsetofcountriesinthe10yearsaftertheliberalizationevent.InPanelC,the estimationisaugmentedwithregion-by-yearinteractivefixedeffects.InPanelD,thesample excludesallcountriesthathaveacapitalliberalizationreformatanypointduringthesampleperiod,basedonBekaert,HarveyandLundblad(2000).InPanelE,thesampleexcludesall countrieswithdomesticreformswhichcoincideintimingwiththeirtradeliberalizationevent, basedon WacziargandWallack(2004). Standarderrorsareclusteredatthecountrylevel.For moredetailsontheliberalizationevents,seeAppendix C.3.*p<0.10**p<0.05***p<0.01.

AppendixDResultsonTaxCapacityMechanism

D.1Firm-levelanalysisinRwanda

Data-sourcesandsample Ouranalysisdrawsonthreeadministrativedatasetsfromthe RwandaRevenueAuthority(RRA),fortheyears2015-2017.Thesedatasourcescanbe linkedthroughuniquetaxidentifiersforeachfirm,assignedbytheRRAforthepurpose ofcollectingcustoms,corporateincomeandvalue-addedtaxes.Thefirstdatasourceis thecustomsrecords,whichcontaininformationoninternationaltradetransactionsmade ineachyearbyeachfirm.Weusethisdatatomeasureeachfirm’sdirectimports.The seconddataisthefirms’corporateincometax(CIT)declarationsmergedwiththefirm registry.Thesedatacontaindetailedannualinformationonfirms’profits,revenueand costs.Weusethesedatatomeasureeachfirm’seffectivetaxrate.Thethirddatasource isthebusiness-to-businesstransactionsdatabase.Thesedataareretrievedthroughthe electronicbillingmachines(EBM)thatallfirmsregisteredforVATarelegallyrequiredto use(EissaandZeitlin,2014).Foragivenseller,EBMsrecordthetransactionstoeachbuyer identifiedbythetaxfirm-ID.Weusethisdatatomeasurebuyer-sellerrelationships.

Whencombined,thesedataallowustoconstructthebuyer-supplierrelationshipsof theRwandanformaleconomyanddocumentfirms’totaltradeexposure.Importantly, sincethenetworkdataisbasedontax-IDs,wecannotobservetransactionlinkageswith informal,non-registeredfirms.Thissampleselectiononformalfirmsalsofeaturesin mostrecentnetworkstudies,byvirtueofrelyingonadministrativedata,includingin Chile(Huneeus,2020);CostaRica(Alfaro-Ureñaetal.);Ecuador(Adaoetal.,2022);India (Gadenneetal.,2022);Turkey(Demiretal.,2021);andUganda(Almuniaetal.,2023).

OursampleisthesetoffirmsthatareregisteredforCITandthatreportpositive incomeduringtheyears2015-2017.Notethatonlyasmallnumberoffirmsareregistered forCITorVATbutnotboth,meaningthattheoverlapwiththeEBMtransactionsdatais strong.However,restrictingthesampletopositiveincomeisconsequential,asasignificant numberofregisteredCITfirmsare’nilfilers’thatreportzeroincome(’nilfilers’are commonindevelopingcountries:Keen,2012).Wemeasureeachfirm i’syearlyeffective taxrateoncorporateprofits,correspondingtocorporate ETRK i inequation(6),asthe ratioofcorporatetaxespaiddividedbynetprofit.Netprofitisrevenueminusmaterial, labor,operational,depreciationandfinancialcosts.

TheEBMdataismeanttoimprovetheenforcementofcorporatetaxesandVAT,and thereportingoflinkagesismorecomprehensivefortherelativelylargerfirmsthatare registeredforthesetaxbases.Forsmallerincorporatedfirmsthatareinsteadregistered tosimplifiedtaxbases(flat-amountorturnover),onlyafewofthemareregisteredfor VAT.Consequently,thesefirmsaremostlikelytoberecordedintheEBMdataasclients inaparticulartransaction,makingthecoverageoftheirlinkageslesscomprehensive. Itisinprinciplealsopossibletomeasure ETRK i amongstthesesmaller,incorporated firms.However,theinformationontheirtaxreturnsregardingcostitemsislessdetailed andadditionalassumptionsontherelationshipbetweenturnoverandprofitarerequired, whichmakestheprofitmeasureinthedenominatorof ETRK i lessprecise.Withthesedatachallengesinmind,wecanincludetheseadditionaltax-registeredfirmsintheanalysis; wefindqualitativelysimilarresults(availableuponrequest).

Exposuretotrade Tomeasureafirm’stotalexposuretotrade,wefollow Dhyneetal. (2021) whousesimilaradministrativedatasetsasourstomeasuretradeexposureof Belgianfirms.Wedefinefirm i’stotalforeigninputshareastheshareofinputsthatit directlyimports(sFi),plustheshareofinputsthatitbuysfromitsdomesticsuppliers l (sli),multipliedbythetotalimportsharesofthosefirms:

where Vi isthesetofdomesticsuppliersoffirm i,and Vl isthesetofdomesticsuppliers offirm l.Thedenominatoroftheinputsharesisthesumofpurchasesfromotherfirms andimports.Notethat sTotal i isrecursive:afirm’stotalforeigninputshareisthesumof itsdirectforeigninputshareandtheshareofitsinputsfromotherfirms,multipliedby thosefirms’totalforeigninputshares.Welimitthecalculationtotheinputsfromafirm’s immediatesuppliers l aswellasthesupplierstotheirsuppliers r (addingmorenetworklevelsonlymarginallyincreases sTotal i ). sTotal i reflectsthedirectimportshareoffirm i’s suppliersandthesuppliers’suppliers,eachweightedbytheshareofinputsthateachfirm buysfromotherdomesticfirms.Wefocusonfirms’exposuretoimportsthroughtheir suppliernetwork;inanextension,wefindqualitativelysimilarresultswhenstudying firms’exposuretoexportsthroughtheirclientnetwork(resultsavailable).

Figure D1 displaysahistogramof sTotal i and sFi forallformalRwandanfirms.While justunder30%offirmsimportdirectly,93%relyontradeeitherdirectlyorindirectly throughtheirsuppliers.Inthemedianfirm,thetotalforeigninputshareis48%(itis39% forthemedianBelgianfirmin Dhyneetal., 2021).

Impactsoftradeexposureon ETRK andsize Tovisualizetheassociationbetweentrade exposure(sTotal i )and ETRK i ,weplotbinnedscattersofthevariablesagainsteachother, afterresidualizingbothagainstyearfixedeffects.InFigure D2,thedotscorrespondto equal-sizedbinsoftheresidualizedtradevariable.Thelinecorrespondstothebestlinear fitregressionontheunderlyingfirm-leveldata(N =18478).Figure D2 revealsapositive andstronglysignificantassociation:firmsthataremoreexposedtointernationaltrade, boththroughdirectimportsandthroughlinkstoimportersinthesupplynetwork,have highereffectivetaxratesoncorporateprofits.

WeinvestigatethisassociationinaregressionforminTable 4,deployingbothOLSand IV.TheIVappliesthedesignin Dhyneetal.(2021) thatextendstheshift-shareapproach of Hummelsetal.(2014) toasettingwithshockpass-throughvianetworklinkages.The empiricalstrategiesandthemainresultsaredescribedinSection 6.3.

Inadditionalregressions(notshownbutavailable),wefindthattheresultsarerobust tocontrollingfortradeshockstofirm i’spotentialsuppliers(firmsthatoperateinthesame industryandgeographicalareaas i’scurrentsuppliersbutarenotcurrentlysupplyingto i)andfirm i’shorizontalsuppliers(firmsthataresupplierstofirm i’scurrentclients).

Wefocusonfirms’exposuretoimportsthroughtheirsupplynetwork,butfirms mayalsobeimpactedbyimportsthroughtheirclients.Inanextension,wefindthat increasedoutputexposuretoimportsthroughtheclientnetworkhaspositiveeffectson ETRK (resultsavailable),thoughthisaverageeffectcouldmaskheterogeneityacrossfirms dependingonthecomplementaritybetweenimportsanddomesticinputs.

Becausetheestimationiswithinthecorporatesector,thisexercisecannotspeakto themagnitudeoftrade’snetimpactonsector-level ETRK C .Thesefirm-levelresultson corporate ETRK i arethereforecomplementarytothecountry-levelresultson ETRK C .An additionallimitationisthatthenetworklinkagemeasuresarederivedfromadministrative datawhich,byconstruction,onlyexistfortaxregisteredfirms(Atkin&Khandelwal, 2020). Thissamplerestrictionimpliesthatthisfirm-levelregressionisnotsuitedtostudythe impactsoftradeonthesizeofinformalfirms.

D.2Typeoftradeanalysis

Weinvestigatewhethertradehasdifferentialimpactson ETR andmechanismoutcomes dependingonthenatureofthetradevariation(Section 6.4).Weuseourtwoinstruments toinvestigatetheimpactsof:(i)importsversusexports(oftradeinbothintermediateG-S andfinalG-S);(ii)tradeinintermediateG-SversusfinalG-S(summedacrossimportsand exports).WeuseUN’sBroadEconomicCategories(Rev.5)toclassifyfinalversusintermediategoods-services(G-S),combiningcapitalgoodswiththelatter.Fortheimports versusexportsIV,thetwo 1st-stageregressionsare

where log(impct) and log(expct) arethelogsoftotalimportstoNDPandtotalexportsto NDP,respectively,incountry c inyear t.Thelog-transformationimprovesthe 1st-stage (resultswithoutlogsarequalitativelysimilar).The 2nd-stageis

Theset-upissimilarforthesecondIV(intermediateG-SvsfinalG-S)wherewereplace log(impct) and log(expct) withthelogoftotaltradeinintermediateG-StoNDPandthe logoftotaltradeinfinalG-StoNDP.IVresultsfordevelopingcountriesareinPanelA ofTable D1,with 1st-stageregressionsinPanelB.Notethatitisexanteunclearifthe twoinstrumentsgenerateastrongoverallfirst-stage.Wegaugethisbyinspectingthe Kleibergen-PaapF-statistics,whicharenotwellaboveconventionalthresholdlevels(13.56 and8.21).Giventhischallenge,welimitourscopetostudyingwhetherthecoefficient signsforthedifferenttypesoftradeareconsistentwithoursimplifiedpredictions(and whethertheystatisticallydifferfromeachother).Theexclusionrestrictionrequiresthat theregressorsadduptototaltradeopenness.Forthisreason,wecannotimplementan IVwhichfocusesontheimpactsoffinalversusintermediateG-Sfor,say,importsonly. Thisalsoimpliesthat,foragivenoutcome,thehypothesesinourtwoIVs(finalversus intermediateG-S;importsversusexports)willbecorrelated.Weaccordinglyadjustthe p-valuesformultiplehypothesestestingusingtheRomano-Wolfmethod.

TheresultsaredescribedinSection 6.4.Sinceweonlyhave2instruments,wecannot decisivelyconcludeontheimpactsforthe4typesoftrade(importsofintermediateG-S, exportsofintermediateG-S,importsoffinalG-S,exportsoffinalG-S).Notwithstanding, theestimatedIVcoefficientsareconsistentwithimportsoffinalG-Sdecreasing ETRK andmechanismoutcomes(µC ,ETRK C ),andimportsofintermediateG-Sincreasingthem.

FigureD1:RwandanFirms’DirectandTotalExposuretoTradeinImports

Notes: Thisfigureshowsthedistributionofdirectforeigninputshare, sFi,andtotalforeigninputshare, sTotal i ,forallcorporatefirmsinRwandabetween2015and2017.Themeasuresarecalculatedannually,and thefigurepoolsallfirm-yearobservations.Thehorizontallinerepresentsascalebreakintheverticalaxis. MoredetailsareinSection D.1

FigureD2:RwandanFirms’TradeExposureandCorporateEffectiveTaxRate

Notes: Thisfigureshowsthefirm-levelassociationbetweentotalforeigninputshare, sTotal i ,andthecorporate effectivetaxrateforallcorporatefirmsinRwandabetween2015and2017.Thegraphplotsbinnedscatters ofthevariablesagainsteachother,afterresidualizingbothvariablesagainstyear-fixedeffects.Thedots correspondtoequal-sizedbinsoftheresidualizedtradeexposurevariable.Thelinecorrespondstothebest linearfitregressionontheunderlyingfirm-leveldata(N =18478),whichisalsoreportedincolumn(1)of Table 4.

WeakInstrumentF-statistic 1

Notes: Thesampleisdevelopingcountries,whicharelowandmiddle-incomecountriesaccordingto theWorldBankincomeclassificationin2018.PanelApresentsIVresults,whilePanelBpresents 1st-stage results.InPanelA’sodd-numberedcolumns,importsandexportsaretheregressorswhileineven-numbered columnsitistradeinintermediategoodsandservices(G-S)andtradeinfinalG-S.Outcomesdifferacross columnsinPanelA:incols.(1)-(2),effectivetaxrateoncapital, ETRK ;incols.(3)-(4),effectivetaxrateon labor, ETRL;incols.(5)-(6),corporateincomeshareofnetdomesticproduct;incols.(7)-(8),mixedincome shareofnetdomesticproduct;incols.(9)-(10),averageeffectivetaxrateoncorporateprofits.Fordetailson theoutcomesandtheinstruments,seeTable 1 and 3.Relativetothosetables,thedropinsamplesizeinthis tableisduetoavailabilityofthetypeoftradeclassification.Foreachcoefficient,wereportinbracketsthepvalueswhichcorrectformultiplehypothesestesting,usingtheRomano-Wolfmethod.Multiplehypothesis testingisaccountedforwithineachoutcomebetweenthetwoIVestimations(exportsandimports;final G-SandintermediateG-S).AtthebottomofeachcolumninPanelA,wereporttheF-testfortheequalityof coefficients.InPanelB,cols.(1)-(2)correspondtothefirst-stageregressionthatinstrumentssimultaneously forimportsandexports;cols.(3)-(4)isthefirst-stageregressionwhichinstrumentssimultaneouslyfor intermediateG-SandfinalG-S.InPanelB,wereporttheF-statisticofexcludedinstruments;theSandersonWindmeermultivariateF-testofexcludedinstruments;and,theKleibergen-PaapF-statistic.*p<0.10** p<0.05***p<0.01.Standarderrorsinparenthesesareclusteredatthecountrylevel.Formoredetails,see Section D.2.

AppendixECapitalLiberalizationEvents

Toattempttoinvestigatetheimpactofcapitalliberalizationoneffectivetaxrates,we drawon Charietal.(2012). Theauthorsmeasurecapitalliberalizationeventsin25 developingcountriesasthedatewhenforeigninvestmentinthedomesticstockmarketwas firstallowed.Theyshowthattheseeventssignificantlyincreaseforeigncapitalinflows, includingforeigndirectinvestment(FDI)andimportofcapitalgoods.66 Comparedto otherpoliciesaimedatliftingFDIrestrictions,liberalizingthedomesticstockmarket occursataprecisepointintime,isnotmarkedbypolicy-reversalornetcapitaloutflow, andisunambiguouslyrelatedtocapitalliberalization(Eichengreen,2001).Weemploy theempiricaldesignofSection 5.1 andcreateasyntheticcontrolcountryforeachofthe 25treatedcountriesandforeachoutcome.Wemeasurecapitalopennessasthetotalsum ofthestocksofforeignassetsandliabilities(Gyglietal.,2019).Wefindsimilarresults whenusingalternativemeasuresofcapitalopenness,includingportfolioequityassets andliabilitiesandtheKOFfinancialglobalizationindex(Gyglietal.,2019).

Figure E1 reportstheevent-studyresults.Relativetoastablepre-trend,weobservea sustainedriseincapitalopennesspreciselyatthetimeoftheevent. ETRK alsoincreases, withasmalllagtothetimingofthecapitalliberalizationevent;inthemedium-run, thepositiveeffecton ETRK issignificantatthe5%level.Thereisnodiscernibleeffect on ETRL.Similartothereasoningforthetradetax-capacitymechanism,theinflowof foreigncapital,aswellasanysubsequentincreaseincapitalgoodsimportsandaggregate investment,maypositivelyimpact ETRK bycontributingtogeneralgrowthoffirmsorby causinganexpansionofinitiallylargerfirms.Consistentwiththisinterpretation,wefind thatthecapitalliberalizationeventsledtoincreasesinthecorporateoutputshareandthe averagecorporateeffectivetaxrate(resultsnotshownbutavailable).

Oneimportantlimitationisthattheeventsconsideredhereremoverestrictionson capital inflows andarenotinformativeoftheimpactsofincreasedcapital outflows.In general,moreworkisneededtounderstandthedeterminantsofpoliciesthatimpact cross-bordercapitalflowsindevelopingcountriesandtheireffectson ETRs.

66FDIincludesgreenfieldinvestments(buildingplantsfromscratch)andcross-bordermergersandacquisitions(M&A). Charietal.(2012) notethatM&Aisimpactedbystockmarketliberalization,makesupto 40-60%ofFDIindevelopingcountries,andcantriggersubsequentgreenfieldinvestments.

FigureE1:EventStudyofCapitalLiberalizationReforms

Notes: Thesepanelsshowevent-studiesforcapitalliberalizationreformsinthe25developingcountries of Chari,Henry,andSasson(2012). Thepanelscorrespondtodifferentoutcomes:capitalopenness(top panels);effectivetaxrateoncapital(middlepanels);effectivetaxrateonlabor(bottompanels).Capital opennessisthetotalsumofthestocksofforeignassetsandliabilities,inconstantUSD.Weusethelog transformationforthisoutcome;resultswherethetotalsumisexpressedasapercentofGDParesimilar. Theleft-handgraphsshowtheaverageleveloftheoutcomeineveryyearto/sincetheevent,fortreated countriesandforsyntheticcontrolcountries.Theright-handgraphsshowtheestimated βe coefficientson theto/sincedummies,basedonequation(4)butwherethetradeliberalizationeventsarereplacedwith capitalliberalizationevents.Thebarsrepresentthe95%confidenceintervals.Standarderrorsareclustered atthecountrylevelandestimatedwiththewildbootstrapmethod.Thetop-leftcornersreporttheF-statistic onjointsignificanceofthepost-eventdummies,withthep-valueinparentheses.DetailsareinAppendix E

Appendix

OnlineSupplementaryAppendix,NotforPublication "CapitalTaxation,DevelopmentandGlobalization: EvidencefromaMacro-HistoricalDatabase"

(Pleasenote:Thisappendixcontainsthesamematerialasthe108-page onlinesupplementaryappendix,includingthecase-studiesreport, circulatedunderthetitle"GlobalizationandFactorIncomeTaxation")

byPierreBachas,Matthew-FisherPost,AndersJensenandGabrielZucman

Notes: Thisfigureshowstheevolutionofeffectivetaxratesonlaborandcapitalforthe17largestlowand middle-incomecountries.Countriesaredisplayedwhentheyrankinthetop20bothintermsofpopulation andNetDomesticProduct(NDP)in2018.Lowandmiddle-incomecountriesarebasedontheWorldBank incomeclassificationin2018.

Notes: Thisfigureplotsthetimeseriesoftaxrevenueasashareofnetdomesticproduct(NDP),separated intofiverevenuesources.Thetopleftpanelcorrespondstotheglobalaverage,weightingcountry-year observationsbytheirshareinthatyear’stotalNDP,inconstant2019USD(N=154).Thebottom-left panelshowstheresultsforhigh-incomecountries,andthebottomrightforlow-andmiddle-income countries.Low,middleandhigh-incomecountriesarebasedontheWorldBankincomeclassificationin 2018.Taxrevenuesareseparatedintofivemaincategories:indirecttaxes(domesticconsumptiontaxesand internationaltradetaxes),payrollandsocialsecuritytaxes,taxesonpersonalincome,taxesonpropertyand wealth,andtaxesoncorporateincome.Thedatasetiscomposedoftwo(quasi)balancedpanels:thefirst coverstheyears1965-1993andexcludescommunistregimes.Thesecondcovers1994-2018andintegrates formercommunistcountries,inparticularChinaandRussia.

FigureO3:Robustnessof

K and ETRL TrendsbyDevelopmentLevels

Notes: Thesepanelsshowtrendsintheeffectivetaxationofcapitalandlaborforhigh-incomecountries (HICs,toppanels)andlowandmiddle-incomecountries(LMICs,bottompanels).Low,middleandhighincomecountriesarebasedontheWorldBankincomeclassificationin2018.Thebenchmarkseriesare denotedbythethickcoloredlinesandthegreylinesdenoteall54possiblepermutationsoftheserieswhen varyingthefourkeymethodologicalchoices(detailedinSection4.2):theallocationofpersonalincome taxrevenuetocapitalvslabor;theallocationofmixedincometocapitalvslabor;presentingresultsforan unbalancedpanelofcountriesvsabalancedpanelviaimputations;and,howtoweightindividualcountries’ serieswhenaggregatingthem.Panel(c)correspondingtothe ETRK forlowandmiddle-incomecountries isfurtherdecomposedinFigure3.

b:0.063 se:(0.026)

Notes: Thesepanelsshowtheassociationbetweentradeandeffectivetaxrates,conditionalonGDPper capita,indevelopingcountries.ThepanelsarecreatedexactlyinthesamewayasinFigure5,exceptthe variablesareadditionallyresidualizedagainstthegrowthrateinGDPpercapita.Developingcountries includelow-incomeandmiddle-incomecountries,wherecategoriesarebasedontheWorldBankincome classificationin2018.Theoutcomeistheeffectivetaxrateoncapital, ETRK ,andonlabor, ETRL,inthe left-sideandright-sidepanels,respectively.Tradeismeasuredasthesumofimportandexportsasashare ofnetdomesticproduct.Boththex-axisandy-axisaremeasuredaswithin-countrypercentchangesover5 years.Eachgraphshowsbinnedscatterplotsofeachoutcomeagainsttrade,afterresidualizingallvariables againstyearfixedeffectsandthe5-yeargrowthrateinGDPpercapita.Eachdotcorrespondstoaventile (20equal-sizedbins)oftheresidualizedtradevariable,withaveragevaluesoftradeand ETR calculatedby ventile.Ineachgraph,thelinerepresentsthebestlinearfitbasedontheunderlyingcountry-yeardata,with thecorrespondingslope-coefficientandstandarderrorreportedinthetop-leftcorner.Formoredetails,see Section4.4.

Notes: Thesepanelsplotthetimeseriesoftradeopenness(top-leftpanel),effectivetaxrateon capital(bottom-leftpanel)andeffectivetaxrateonlabor(bottom-rightpanel).Thesampleis limitedtolow-andmiddle-incomecountries,accordingtotheWorldBankincomeclassification in2018.Withineachpanel,theorangeline(greenline)tracestheevolutionofthegroupwhich hadrelativelyhigh(low)tradeopennesspriorto1995.Specifically,high(low)tradeopennessis definedashavingaveragetradeopennesswhichliesabove(below)theglobalaveragebetween 1965and1995.Tradeopennessismeasuredastheshareofimportsandexportsinnational domesticproduct;notethatthissharecanexceedavalueof1.Eachlineplotstheyearfixed effectsfromanOLSregressionintherelevantsub-sampleoftheoutcomeoncountryandyear fixedeffects.Theinclusionofcountryfixedeffectslimitstheinfluenceofcountriesenteringand leavingthesample.Thefixedeffectsarenormalizedtoequaltheleveloftheoutcomevariable intherelevantsub-samplein1965.Theshadedareahighlightsthenotable1990-1995period, whichmarksthebeginningofthe‘secondwave’ofglobalizationthatfeaturedaproliferation ofbilateralandmultilateraltradeagreements (Egger,Nigai,&Strecker, 2019).

FigureO6:StrengthofIndividualInstrumentsAcrossSubsamples

(a)Sub-samplesofNDPpercapita

(b)Sub-samplesoftime-periods

Notes: Thesefiguresshowthestatisticalstrengthoftheinstruments Zoil distance and Zgravity in developingcountries(lowandmiddle-incomecountriesbasedonWorldBankclassificationin 2018, N =4916).Theoutcomeisthefirst-stageF-statisticfromaregressionoftradeopenness oneachindividualinstrument,insubsamplesoflogNDPpercapita(panela)andyears(panel b).Thex-axisvariableispartitionedintotendeciles,andtheestimationisdoneinincrements ofonedecilewithabandwidthofoneadditionaldecileofoneitherside.Tomaintainequal samplesizes,estimationcenteredonthefirstandthetenthdecilearedropped.Thisfigureis discussedinSection5.2.

FigureO7:RobustnessofTradeLiberalizationtoChangingEvents-Sample (a)Effectivetaxrateoncapital

(b)Effectivetaxrateonlabor

Notes: Thesefiguresshoweventstudyimpactsoftradeliberalizationontheeffectivetaxrate oncapital(panela)andtheeffectivetaxrateonlabor(panelb).Thesolidgreenlinedisplays thedynamicevent-studycoefficients βe estimatedinthefullsampleof7liberalizationeventcountries(Figure6);thegraylinespresenttheevent-studycoefficientsestimatedinsamples thatremoveoneevent-countryoneatatime.MoredetailsinSection5.1.1.

High income countriesLow and middle income countries

Notes: Thisfigureplotsthetimeseriesofthestatutorycorporateincometax(CIT)rate,separatelyforhighincomecountriesandformiddleandlow-incomecountries.Low,middleandhigh-incomecountriesare basedontheWorldBankincomeclassificationin2018.Eachlineplotstheyear-fixedeffectsfromanOLS regressionoftheCITrateoncountryandyear-fixedeffectsintherelevantsub-sample.Theinclusionof country-fixedeffectshelpsalleviatetheinfluenceofcountriesenteringandleavingthesample.Thefixed effectsarenormalizedtoequaltheleveloftheCITrateintherelevantsub-samplein1965.Country-year observationsareweightedbytheirshareintheyear’stotalnetdomesticproductinconstant2019USD.

Notes: Thisfigureplotsthetimeseriesofthecapitalshareasapercentageofnetdomesticproduct(NDP). Thesolidlinecorrespondstotheoverallcapitalshare,andthedottedlinetothecapitalsharewithinthe corporatesector.Thetopleftpanelcorrespondstotheglobalaverage,weightingcountry-yearobservations bytheirshareinthatyear’stotalNDP,inconstant2019USD(N=154).Thebottom-leftpanelshowstheresults forhigh-incomecountries,andthebottomrightforlow-andmiddle-incomecountries.Low,middleand high-incomecountriesarebasedontheWorldBankincomeclassificationin2018.Thedatasetiscomposed oftwo(quasi)balancedpanels.Thefirstcoverstheyears1965-1993andexcludescommunistregimes.The secondcovers1994-2018andintegratesformercommunistcountries,inparticularChinaandRussia.

TableO1:NotesonTaxRevenueDataSeries

Country Years MaindatasourcesHistoricalarchive(HA)datasources

Afghanistan 2003-2018ICTD(2003-2018)

Albania 1994-2018 ICTD(1994-2018)

Algeria 1965-2017HA(1965-2017) AnnuaireStatistiquedel’Algerie

Argentina 1965-2018 HA(1965-1989); OECD(1990-2018)

Armenia 1994-2018HA(1994-2018)

Australia 1965-2018 OECD(1965-2018)

Austria 1965-2018OECD(1965-2018)

Azerbaijan 1994-2018 ICTD(1994);HA (1995-2018)

Bahamas 1973-2018 HA(1973-1989); OECD(1990-2018)

Bahrain 1974-2018

Bangladesh 1976-2018

Barbados 1972-2018

HA(1974-1987); ICTD(1988-2018)

HA(1976-2000); ICTD(2001-2018)

HA(1972-1990); OECD(1991-2018)

Belarus 1992-2018ICTD(1993-2018)

Belgium 1965-2018

OECD(1965-2018)

Belize 1982-2018 HA(1982-1989); OECD(1990-2018)

SintesisEstadisticaMensual,Boletin MensualdeEstadistica

DataprovidedbyStatisticalCommitteeoftheRepublicuponrequest

DataretrievedfromStateStatistical Committeeonlinedatawebsite

IMFGovernmentFinanceStatistics, IMFArticleIVReport

IMFGovernmentFinanceStatistics, IMFArticleIVReport

BudgetBook,StatisticalDigestof Bangladesh

IMFGovernmentFinanceStatistics, IMFArticleIVReport

IMFGovernmentFinanceStatistics, IMFArticleIVReport

Commentsonseries

ExistsHAseries(1973-1978),butseriesisshortandtax/GDPfiguresappeartoovolatile(could notfindcorroboratingevidence);historicalICTDdataexists(1982-1989),butnodisaggregation bytaxtype

Databeginsinpost-communistperiod;existingHAdatanestedincoverageinICTD,soprefer ICTDsource(andlevelsoftaxrevenuesarecomparablebetweensources)

Taxesurchiffred’affairesclassifiedasunallocablebetweenPITandCITinHA,butitisataxon firms;’Contributionsdiverses’leftasanexcisetaxin1960s;interpolate1967,1970-1971,1974.

Historicallystabletax/GDPseries,despitemultiplepoliticalchanges,untilgrowthintaxtake in1990swhenindirecttaxexpands;interpolatedirecttaxsplit(PITvsCIT)between1961-1969 and1984-89,basedonratiosonadjacentyears;socialsecuritydatafromAlvaredo(2010)is comparabletoOECDinoverlappingyears,soispreferredhistoricalsource.

Independencein1991,butofficialpublishedrevenuedatabeginsin1994;notabledipinsocial securityinmid-2010sisgenuine,resultsfromseveralreforms(IMF,2019;Asatryan,2014).

ICTDdataismoreaccuratein1994,from1995matchesintrendsandlevelswithHAdata; independencein1991,butunrestensueduntil1994andlimitedgovernmentrecords(HArecords unreliable,GDPnumbershardtocorroborate);non-taxrevenuesaresignificant,especiallysince early2000s;spikeinCITrevenueinlate2000sreflectsgenuineeconomicshock(Aliyevand Gasimov,2016)

HistoricalHAdataisbasedonIMFsources;socialInitialdifferencebetweenHAandOECDin overlappingyearsisduetosocialsecuritycontributions(missinginHA).

HistoricalHAdataisbasedonIMFsources;changeinCITrevenuesin1970scorrespondsto nationalizationandexpropriationevents(Kobrin,1984)andtherewasnomajorchangetooil productionduringthisperiod(RossandMahdavi,2015)

Independencein1971,butreliablegovernmentdatabeginsin1976.Interpolate1980-1981;very lowdirecttaxescollectedonfirmspriorto1986reform,andsignificantCITdropin2003.

HAdataisbasedonIMFhistoricalreports;usesocialsecurityasreportedininitialsources, corroboratedwithdatafromFisunogluetal.(2011)

ICTDdataexistsin1991butitisnotdisaggregated;decreaseinCITandincreaseinindirect taxesinearly2000s,maybeduebothtoRussianfinancialcrisisandtoICTDswitchingitssource fromIMFArticleIVtoIMFGFS[flagged]

HAdataisbasedonhistoricalIMFdata;interpolate1986-1987;socialsecuritycontributions missinginHA,wetakeitfromFisunogluetal.(2011);socialsecuritystartedin1979(SSA,2015)

Benin 1965-2018 HA(1965-2018) ComptesdelaNation,StatistiquesFinancesPubliques Socialsecurityfirstimplementedin1970(SSA,2017);interpolatebetween1988and1990.

Bolivia 1965-2018 HA(1965-1989); OECD(1990-2018) AnuarioEstadistico,BoliviaenCifras

BosniaandHerzegovina 1999-2018 ICTD(1999-2018)

1967-2018 HA(1967-1989); ICTD(1990-2003); OECD(2004-2018)

AnnualStatementsofAccounts,StatisticalAbstract,StatisticalBulletin,FinancialStatistics

UsehistoricaldatafromFisunogluetal.(2011)forsocialsecurity,whichstartedpriortoour time-coverage(SSA,2017);unclearwhat’complementaria’tax(1960-1970)refersto,weassignit equallytoPITandCIT;largedeclineinmid-1980sappearsgenuine(Kehoeetal.,2019)

Warendsin1995butreliabledataonlystartsin1999;importantroleoflocaltaxation(Foxand Wallich,1997;Kandeva,2001),comparedatafromICTDwithIMFGFSandZornetal.(1999) whichsuggestlocaltaxsourcesareadequatelycovered.

OECDdataismissingtradetaxes,whichwebringinfromICTDinoverlappingyears;GDP estimatesdifferinthepre-1990periodbetweenIMF,WorldBankandUN-SNAsources[flagged], weuseWorldBanksource;CITvalueinICTDin1990appearstoolarge,interpolatebasedon surroundingyears[flagged];’mineraltax’inHAdataappearstopartlyincludeCIT,predict CIT-sharebasedonprecisesplitbetweenCITandresourcetaxinothersources[flagged];social securityprogramstartsin1996accordingtoSSA(2017),howeverweobservecontributions priortothatdate(Fisunogluetal.,2011)whichmaycorrespondtoanon-contributorypension benefit(ArzaandJohnson,2006)[flagged];largeeconomicshocksin1980swhichaffectedpublic finances(O’Connell,1988).

Comparisonwithotherstudies

Polackova(1996)tax/GDPestimatein1993-1994isslightlyhigher thanours,butlikelyincludesnon-taxrevenues;WorldBank(2020) tax/GDPmatchesourestimatesfrom1995to1998.

Tax/GDPnumberscomparabletohistoricaltime-seriesfromAlvaredo(2010).

Polackova(1996)tax/GDPestimatein1993-1994isslightlyhigher thanours,butlikelyincludesnon-taxrevenues

Comparabletax/GDPnumbersinrecentperiodsbasedonWorld Bank(2020),thoughthedatainlattersourcestopsin2004.

Comparabletax/GDPnumberswithICTDinoverlappingperiods.

Consistenttax/GDPwhencomparingtoWorldBank(2013),after adjustingICTDforexistenceofsocialsecuritycontributions

Historicalsourcesarehardtofind.HAseriescomparabletohistorical IMFseriesinearlyperiods(1960-1970),anddipinlate1980sexists acrosssources.

Historicaltax/GDPnumberscomparabletoKehoeetal.(2019)and Sachs(1990),thoughlargerthannumbersreportedinThirsk(1997) in1970s[flagged].

Comparabletax/GDPnumberswithWorldBank(2020)after2005, buthighertax/GDPreportedinDingandSherif(1999)forhistorical period[flagged].

Comparablehistoricaltax/GDPbasedonTakirambudde(1995), O’Connell(1988),Bonu(1995).

Botswana

TableO1:NotesonTaxRevenueDataSeries

Country Years MaindatasourcesHistoricalarchive(HA)datasources

Brazil 1965-2018 HA(1965-1989); OECD(1990-2018) AnuarioEstatisticodoBrasil

Bulgaria 1993-2018HA(1993-2018)

BurkinaFaso 1965-2018 HA(1965-1999); OECD(2000-2018)

Burundi 1965-2018HA(1965-2018)

Cambodia 1994-2018 ICTD(1994-2018)

Cameroon 1965-2018 HA(1965-1992); OECD(1993-2018).

Canada 1965-2018

CentralAfricanRepublic1965-2018

Chad 1965-2018

Chile 1965-2018

StatisticalYearbook,MonthlyStatistical Reviews

ComptesEcononomiquesdelaHauteVolta,ComptesNationauxdelaHauteVolta,LesComptesEconomiquesdela Nation

AnnuaireStatistique,BulletinStatistique

NoteTrimestriellesurlaSituation Economique,NoteAnnuelledeStatistique

OECD(1965-2018)

HA(1965-2007); ICTD(2008-2018)

HA(1965-1982); ICTD(1983-2009); OECD(2010-2018)

HA(1965-1979); ICTD(1980-2018)

BulletindeStatistique,BulletinMensueldeStatistique,AnnuaireStatistique

BulletinMensueldeStatistique,Budget Generaldel’Etat

InformeEconomicoAnual,Statistical ProfileofChile,

China 1994-2018 HA(1994-2007); OECD(2008-2018) StatisticalYearbook,onlinedata fromNationalBureauofStatistics

Colombia 1965-2018

Congo 1972-2018

HA(1965-1989); OECD(1990-2018)

HA(1972-1981); ICTD(1982-1998); OECD(1999-2018)

Commentsonseries

ChallengingtofindreliableGDPdatainhistoricalperiods,usereportednationalpriceindex fromAyres(2019)priorto1990whichinturnsisbasedonBrazilianInstituteofGeography andStatistics;OECDdataappearstobehighquality,includingwithrespecttosub-nationaltax collection;corroboratesub-nationaltaxesinHAdatausingdetailedinformationfromAfonso andAraujo(2004),whichdiscusseslocalpublicfinancesince1960s,andVarsano(1999);use Fisunogluetal.(2011)priorto1980forsocialsecuritycontributions.Interpolateincometax between1968and1971and1973and1975.

Excesstaxrevenue’categoryin1995-96iscontributionfrompreviousyeartaxescollected,we checkthatithasnotbeendouble-counted[flagged];somedifferenceinsocialsecuritycontributionsbetweenUN-SNAdataandFisunogluetal.(2011),preferlattersourceasitcomparesto ICTDinoverlappingyears

Severalperiodsofpoliticalinstability(1974,1980-1983,1987)whereinterpolatedata;largetax frompropertyrightsregistrationtaxinlate1970s,appearsgenuine.

Datainterpolated1970-1973butconcernsremainaboutdataquality(violence)[flagged];IMF (1973)datasuggestslittlechangeincompositionoftaxes,thoughchangeinoveralltaxtake; historicalIMFsourcelistsataxonproperty,whichcannotbefoundinHA(whichinstead recordsatransactiontax)

HAdataexistsfrom1987to1993,butthedatahasqualityconcerns(givenpoliticaltransition), soprefernottousethatdata;socialsecuritycontributionsbeginin1997(SSA,2018),wedraw ondatafromFisunogluetal.(2011).

Interpolate1969-1970,1989;classifythe’taxeunique’asanindirecttax,ratherthandirectfirm tax,basedoninformationfromGauthieretal.(2002);dropinoverallrevenuein1980sconfirmed tobemainlyrelatedtodwindlingtradetaxes(GauthierandGersovitz,1997);declineinwealth taxesbetween1968and1993isnotaccountedforviaadditionalsources[flagged];socialsecurity contributionsstartin1968(SSA,2017),wedrawdatafromFisunogluetal.(2011);significant generalvolatilityofrevenueslikelydrivenbyrelianceonvolatilecommodities(deHerdt,2002).

VaillancourtandKerkhoff(2019)foradditionalinformationonthecapitalshareofPIT

Politicalunrestinearlyhistoricalperiodscreateuncertaintyarounddata[flagged];the’tax additionnelle’inthe1960swasadirecttaxonfirmsratherthanindividuals(Mbounou-Ngopo, 2019);dipsintaxcollectioninmid-1990scoincidewithpoliticaltransitions.HAdatafeatures changeinterminology1994-1997,whichcoulderroneouslybeinterpretedasasubstitutionfrom directtoindirecttaxes;socialsecuritystartedin1963(SSA,2019),wedrawonFisunogluetal. (2011)forentireHAperiod.

Militaryrulefrom1975-1978andcivilwarfrom1979-1982,interpretdatawithcautionduring theseperiods[flagged];socialsecurityprogrambeganin1977(SSA,2017),drawondatafrom Fisunogluetal.(2011)priortoOECDcoverage;volatilityinrecentyearsisnotablebutappears tobegenuine(foundinbothOECDandICTDdata).

Themorerecentdata(1990-2018)isfromInter-AmericanDevelopmentBank;interpolate197879;dataqualityischallengedduring1970-1973period,thetransitionyearsforAllende[flagged]; useinformationfromMamalakis(1978)andCorbo(1989)toconfirmHAdatasplitbetweenCIT andPIT,theextentofsub-nationaltaxes,andtheexistenceofsocialsecuritycontributions.

SeeAppendixBformoredetailsonsourcesandtaxsystem;dataexistspriorto1994,butwestart theseriesafterthetransitionawayfromcentralplanning(conceptualdifficultieswithdefining certainrevenuesourcesastaxesinthepre-transitionperiod);HAandOECDmatchwellin overlappingyears.

Comparisonwithotherstudies

Historicaltax/GDPnumberscomparabletoAfonsoandAraujo (2004),Chelliah(1971)-bothofwhichcovernationalandsub-national revenues.

Comparabletax/GDPnumbersinearlyperiodsbasedonBogeticand Hassan(1997),matchWorldBank(2020)inlateryears.

Comparabletax/GDPnumberswithICTDinoverlappingperiods.

Tax/GDPnumberscomparabletoGauthier,SoloagaandTybout (2002).

Observeddecreaseintax/GDPinrecentperiodsalsoconfirmedin IMFreports(IMF,2016).Difficulttofindhistoricalsourcestocorroborate.

Tax/GDPestimateinearlyhistoricalperiod(1965)approximately1.5 percentagepointslowerthanreportedinLotzandMorss(1967).

SocialsecuritydatafromFisunogluetal.(2011)inagreementwith historicaldatafromCerda(2005).Historicaltax/GDPratiocomparabletovaluesreportedinWorldBank(1980).

Tax/GDPcomparabletovaluesreportedinLouandWang(2008) andICTD.

EstadisticasFiscales,CifrasFiscales,InformeFinanciero

AnnuaireStatistique,BulletinMensuel deStatistique,EconomicSurvey

CostaRica 1965-2018 HA(1965-1987); OECD(1988-2018) AnuarioEstadistico,MemoriaAnnual

Goodmatchinlevelswhensourcesoverlap;special’proequityincometax’,initiallyclassifiedas unallocablebetweenPITandCITinOECDdata,isinfactataxoncorporateincome(WorldBank, 2014);concernifwearecapturingallsub-nationaltaxesintheHAperiod(basedonArroyo-Abad andLindert,2016)[flagged];socialsecuritydatamissinginHAperiod[flagged].

Interpolatebetween1977and1979;yearofoverlapbetweenICTDandOECDcoincideswith periodofgenuinedropinrevenues,duetoviolence.

UseIMFhistoricaldatabetween1974and1987,matcheswillinoverlappingyearswithbothHA andOECD;lowCITrevenuecollectedinthe1980sisconfirmedinShome(1992);socialsecurity contributionsarefromFisunogluetal.(2011).

McClurecitesatax/GDPin1980whichis3percentagepointshigher thanourHAestimate,thoughourestimatesagreewithMitchell (2003)intheperiod1965-1989.

Historicaltax/GDPvaluesarebroadlyinlinewithTaitetal.(1979) forthe1970s.

Comparablehistoricaltax/GDPcomparedtoTaitetal.(1979).

TableO1:NotesonTaxRevenueDataSeries

Country Years MaindatasourcesHistoricalarchive(HA)datasources

Coted’Ivoire 1965-2018 HA(1965-1989); OECD(1990-2018)

Croatia 1996-2018ICTD(1996-2018)

Cuba 1990-2018 OECD(1990-2018)

BulletinMensueldeStatistique,Les ComptesdelaNation,BudgetGeneral deFonctionnement,

Cyprus 1972-2018HA(1972-2018) AnnualBudget

CzechRepublic 1993-2018 OECD(1993-2018)

DemocraticRepublicofthe Congo 1968-2018 HA(1968-1990); ICTD(1991-2018) ConjonctureEconomique

Denmark 1965-2018

DominicanRepublic 1968-2018

Ecuador 1973-2018

Egypt 1965-2018

OECD(1965-2018)

HA(1968-1989); OECD(1990-2018) EjecucionPresupuesto

HA(1973-1989); OECD(1990-2018) CuentasNacionalesdelEcuador

HA(1965-1989); ICTD(1990-2001); OECD(2002-2018) AnnuaireStatistique

ElSalvador 1965-2018

HA(1965-1989); OECD(1990-2018)

EquatorialGuinea 1981-2018 ICTD(1981-2004); OECD(2005-2018)

Estonia 1993-2018 ICTD(1993-1994); OECD(1995-2018)

Ethiopia 1965-2018

Fiji 1972-2018

AnuarioEstadistico,IndicadoresEconomicosySociales

HA(1965-1992); OECD(1993-2018). StatisticalAbstract

HA(1972-1989); ICTD(1990-2007); OECD(2008-2018)

Finland 1965-2018OECD(1965-2018)

France 1965-2018 OECD(1965-2018)

Gabon 1965-2018

Gambia 1972-2018

IMFGovernmentFinanceStatistics, IMFArticleIVReport

HA(1965-1985); ICTD(1986-2018)

AnnuaireStatistiqueduGabon,Tableau deBorddel’Economie

HA(1972-1987); ICTD(1988-2018)

EstimatesofRecurrentRevenueandExpenditure,GambiaStatisticalYearbook

Commentsonseries

Interpolate1977-1979,1987-1989;inHAyearswhereindividualversusfirmsplitexistsfor’tax onbenefices’,assumesameratioinallotheryearswheresametaxdoesnothavebreakdown; OECDdataappearstounder-estimatePITinrecentyears,useinformationfromIMFandICTD toadjustlevel[flagged].

HAdataexistsbuthaslesscompletecoveragethanICTDbytypeoftax;ICTDalsoappearsto havecapturedwellsub-nationaltaxes(IMF,2020).

HAdataexistsinsomeofthehistoricalOECDperiods,butprefertodrawalldatafromasingle source

HistoricalIMFdatabetween1972and1989,thenHAforremainingperiods;supplementHA withFisunogluetal.(2011)forsocialsecuritycontributions;Lent(1977)confirmsexistenceof corporateincometaxin1970s.

Somedifferencebetweensourcesinoverlappingyears,coincideswithperiodofhighinflation andsignificantseignioragetax(DeHerdt,2002;Nachega,2005)[flagged];between1977and 1990,taxtypecalled’divers’whichisinitiallyunallocablebetweenPITandCIT[flagged];likely thatwecapturelocaltaxrevenuesinhistoricalperiods.Interpolate1973,1992-1995.

Specificityinhowsocialsecuritycontributionsarelevied(throughthePIT,unlikeinmanyother countries)

OmissionofindirecttaxcategoriesinHAinlate1970sandlate1980s-interpolatebasedon surroundingyears[flagged];givenunrestinearly1960s,webeginourseriesin1968.

MinistryofFinance(2016)dataincludesbreakdownbetweenresourceandnon-resourcerevenuesinhistoricalperiods,whichsuggestthatourHAdatasometimesincludesresourcerevenues[flagged]-usehistoricalIMFdatainlimitedsetsofyearstocorrectthedirectfirmincome taxnumbersinHA.

HAandICTDdatamatchverywellinoverlappingyear;forperiodspriortoOECD,useFisunoglu etal.(2011)tomeasuresocialsecuritycontributions;interpolate1965-67,1970-1971,and19731974;sharpdropinrevenuein1980sisgenuine;difficulttoensureCITdoesnotinpartcapture resourcerevenues,astheygrewinimportancein1970s[flagged];inyears2002-2008,’taxon movablecapitalrevenuesfromCentralBank’appearstobeunallocablebetweenCITandPIT, weassignsharesbasedoninformationinWaterbury(2014).

Significantcurrencyreformin2001,interprettax/GDPnumberwithcautioninthatyear [flagged],andweadjustthecurrencyinprioryearstobecomparable;socialsecuritycontributionsbeganin1959(SSA,2017),weusedatafromFisunogluetal.(2011)inyearspriorto OECDcoverage,whichwassubstantial(Grosh,1990).

Verylimiteddirecttaxescollectedpriortoearly2000s,corroboratedinSame(2008);historically strongrelianceonrevenuesfromcommodityexports(HumanRightsWatch,2017);socialsecurity firstimplementedin1947(SSA,2017),weusedatafromFisunogluetal.(2011).

Russianpresenceonlyphasedoutby1993;goodmatchbetweensourcesinoverlappingyears

Incometaxonlyseparatespersonalfrombusinessincomestartingin1975;perSchwab(1970), incometaxschedulespriortothenincludedbothindividualandfirmincome-sowekeepthe initiallyunallocablecategory;ourHArecordoflandusefeessuggestswearecapturingsubnationaltaxes;Chloe(1984)notestherelianceoncommodityexports,whichinducesvolatilityin taxrevenues;verylimitedquantityofsocialsecuritycontributionsincomparisonwithMengistu etal.(2017)[flagged].Interpolate1989,2005.

HAdataderivesfromhistoricalIMFdata;useFisunogluetal.(2011)forsocialsecuritycontributions,whichbeganin1966(SSA,2016);disappearanceofpropertytaxesbetween1992and 2010,thoughconsistentlymissinginbothICTDandOECDsources[flagged]

ConfidentthatHAsourcesexcludesresourcerevenues,comparisonwithhistoricalIMFdata; interpolate1977-1980;severalhistoricaltaxesunallocablebetweenCITandPIT,including’impot generalsurlerevenue’,forwhichhistoricalsourcesarenotinformative(Abdel-Rahman,1965); socialsecuritycontributionsbeganin1963(SSA,2019),wedrawondatafromFisunogluetal. (2011).

Startdatain1972,ascurrencychangein1971introducesmeasurementchallenges;atsame time,continuedmacro-economicvolatilitymeansdatapriorto1990shouldbeinterpretedwith caution[flagged]

Comparisonwithotherstudies

Comparablelevelsoftax/GDPinWorldBank(2020).

Comparabletax/GDPlevelstoLent(1977).

TrendsintaxationbysourceinhistoricalHAperiodsisconsistent withEmziet(1997).

HistoricalIMFdataagreeswithHAestimatesin1970s.

CEPAL(1991)corroboratestaxrevenuelevelsin1979-1987,including thespikein1985.GarciaandUquilles(1992)confirmlevelsin19891992period.

Smith(1970)andNyrop(1976)corroboratelowlevelofPITin1960s andearly1970s.Mitchell(2003)differsonaverageby10%fromour tax/GDPestimates.

Estimatesoftax/GDPin1980sand1990sveryclosetonumbers reportedinCardemiletal.(2000).

Ourtax/GDPnumbersinearlytransitionperiodmatcheswellwith Polackova(1996).

CompareswellwithMascagni(2016)forhistoricaltax/GDPin1960s1980s,seriesarewithinonepercentagepointofeachother.

Limitedhistoricalsources,thoughdropinrevenuein1980siscorroboratedinGaulme(1991)andYates(1996).

Tax/GDPestimatesinHAarecomparabletoAnsari(1982),about 18%loweronaverage.Jallow(2016)provideshistoricalaccountof taxsystem,butnodataontax/GDP.

TableO1:NotesonTaxRevenueDataSeries

Country Years MaindatasourcesHistoricalarchive(HA)datasources

Georgia 1994-2018ICTD(1994-2018)

Germany 1965-2018 OECD(1965-2018)

Ghana 1967-2018 HA(1967-1999); OECD(2000-2018) QuarterlyDigestofStatistics

Greece 1965-2018 OECD(1965-2018)

Guatemala 1965-2018 HA(1965-1989); OECD(1990-2018)

Guinea 1980-2018 ICTD(1980-2018)

Guyana 1972-2018

Haiti 1975-2018

Honduras 1973-2018

HA(1972-1986); ICTD(1987-1989); OECD(1990-2018)

HA(1975-1989); ICTD(1990-2018)

EstadisticasdeFinanzasPublicasde Guatemala

Commentsonseries

Socialsecuritycontributions,intheircurrentform,beganin1990(SSA,2010),wedrawondata fromFisunogluetal.(2011);interpolatesocialsecuritybetween1995and1997.

Verygoodmatchbetweensourcesinoverlappingyears,onceaccountforsocialsecuritycontributions;removerevenuefromgovernmentpropertiesinHAhistoricalperiods(initiallycounted within’taxoninterestandprofits);volatilepatternsin1980sconfirmedinDarko-Oseiand Telli(2017),coincidingwitheconomicturbulenceandIMFrecoveryandstructuraladjustment agreements.

OECDclassifiessolidaritytaxasunallocable,since1995,butitisataxoncorporations(PriceWaterhouseCooper,2020);historicaldataonsocialsecuritycontributionsfromFisunogluetal. (2011)seemunreliableinthiscase,sowereportsuchtaxesfrom1978onward[flagged].

Revenuemovementsin1980scoincidewithpoliticaltransitionandnewfiscalregimeunder Conte(Yansane,1990);Topouzis(1989)notestherisingimportanceofresourcerevenue,which maybecapturedinsideourCITcategorybetween1985and1992[flagged].

IMFGovernmentFinanceStatistics, IMFArticleIVReport

TableaudesOperationsFinancieresde l’Etat

HA(1973-1989); OECD(1990-2018) AnuarioEstadistico

Hungary 1994-2018 OECD(1994-2018)

Iceland 1965-2018OECD(1965-2018)

India 1965-2018 HA(1965-2019)

Indonesia 1965-2018

MonthlyAbstractofStatistics,Indian PublicFinanceStatistics

HA(1965-1996); OECD(1997-2018) StatistikIndonesia

Iran 1969-2018 HA(1969-2018) AnnualBudget,IranStatisticalYearbook

Ireland 1965-2018OECD(1965-2018)

Israel 1972-2018 HA(1972-1992); OECD(1993-2018) AccountantGeneral’sReport,IMFGovernmentFinanceStatistics

Italy 1965-2018OECD(1965-2018)

Jamaica 1965-2018 HA(1965-1989); OECD(1990-2018)

Japan 1965-2018OECD(1965-2018)

Jordan 1973-2018 HA(1973-1989); ICTD(1990-2018)

StatisticalYearbookofJamaica,Abstract ofStatistics

AnnualReport,YearlyStatisticalSeries, MonthlyStatisticalBulletin

HAisdrawnfromIMFsources;dropinrevenueatendof1980sisgenuine,likelyreflects economicturbulenttimes(consistentnumbersacrosssources);initialdifferenceacrosssources inoverlappingyearsisduetoICTDdatanotaccountingforsocialsecuritycontributions.

HAdatadrawsonhistoricalIMFreports;interpolate1988-1989,thoughshouldbeinterpreted withcautiongivenviolenceattime[flagged];spikein1987isdrivenbycollapseinunderlying valueofGDP;socialsecuritybeginsin1965(SSA,2017),wedrawonFisunogluetal.(2011); propertyandtransactiontaxesexistinHA,smallinmagnitude,butaremissingfromICTDdata [flagged].

1974isacomplicatedyearduetomissingtypesoftaxes,soweinterpolateit;jumpinrevenues aroundyearofoverlapbetweenOECDandHA,butHerrera(1994)corroboratessignificant changesintaxperformanceatthattime;usesocialsecuritydatafromFisunogluinallyearsprior toOECDcoverage.

WorldBank(2020)corroboratesspikeinnon-recurrentpropertytaxesobservedin2016;infer, basedonHerdandThorgeirsson(2001)andKarlsson(2014),assignportionofinitiallyunallocableOECDrevenuetoindividuals.

InHA,’incometaxotherthanCIT’isnotexclusivelyataxonindividuals,weuseadditional informationtoassignthiscategorytofirmsversusindividuals(includingRao,2005);HAdata carefullyrecordsacomprehensivesetofwealthandpropertytaxes,includingforland;reasonablyconfidentHAcapturessub-nationaltaxes;socialsecuritycontributions,verysmallin magnitude,appeartobereportedinsideindividualincometaxcategory[flagged].

Strongmatchfordatainoverlappingyearsbetweensources;1983reformcollapsedmultiple taxes(CIT,PIT,otherdirectincome)intoasingleschedule,soweusesharesofcapitalversus labordirectincometaxesin1983andassignsuchsharesuntil1997[flagged];reasonableability toexcluderesourcerevenuesinHAdata.Interpolate1968-1971,1994.

Reasonableabilitytoexcluderesourcerevenues;socialsecuritydatainHAandinICTDare unreliable,weinsteaddrawdatafromUN-SNA,startingin1996[flagged];datastrictlybased oncentralgovernment,butnodocumentationsuggestssub-nationaltaxesarequantitatively important.

HAdrawsinpartfromhistoricalIMFdata;interpolate1992-1994;someIMFdatareportedin 1970sseemsapproximate[flagged];historicalIMFmissespropertytaxinsomeyears,supplement withICTDdata.

Propertytaxesdipin1997,butthisappearsgenuine(intheOECDdata,basedonlocalpublic financerecords);unallocablepartofdirectincometaxesissignificantinthe1980s,comprising amixoftaxesondividends,interestandan’educationtax’since1983(GovernmentofJamaica, 1988),andweuseadditionalinformationfromInter-AmericanCenterofTaxAdministratorsto assignittofirmsversusworkers;

Comparisonwithotherstudies

BarboneandPolackova(1996)havecomparabletax/GDPestimates for1995,onceourseriesareadjustedforsocialsecuritycontributions.

Reasonablecomparisonfortax/GDPnumbersinhistoricalperiods, asreportedinChelliah(1971),LotzandMorss(1967),Killick(1978) andDarko-OseiandTelli(2017).

Tax/GDPestimatesinearlyhistoricalyears(1965-1967)liewithin onepercentagepointofnumbersfromLotzandMorss(1967).

Dioda(2012)estimatessimilartax/GDPin1990,Tanzi(2000)estimatesslightlyhighertax/GDPbetween1993and1999.

HistoricalIMFdataarecomparabletoHAnumbersfortax/GDPin the1980s.

Verycomparabletax/GDPestimateinearliestperiodswithRao (2005);alsoconsistentwithrecentestimatesinWorldBank(2019).

Multiplesourcesestimateverylowhistoricaltax/GDPratios(1960s and1990s),between2and8percentagepoints(Prasetyo,2018;Gillis, 1985;Amiretal.,2013),generallyconsistentwithourestimates

Inoverlappingperiod(1979-1989),ourtax/GDPestimatesandtrend matchverycloselywithMazarei(1996).Generallylimitedstudiesin Englishonhistoricaltaxsystemincountry.

Historicaltrendsin1980sand1990sarecorroboratedinBrender (2007),thoughtheleveloftax/GDPisapproximately15%higher thanourestimates.

Historicalestimatesoftax/GDPin1960sand1970sare10-18%larger thanours(Chelliah,1971;Shome,1992).

HAuseshistoricalIMFdata;atyearofmergebetweensources,Abu-Hammour(1997)confirms alargeincreaseintax/GDP;non-taxrevenuesaresignificantinthecountry,butoursourcescan reasonablyexcludethem. HAdatamatchesverycloselythenumbersinAbu-Hammour(1997).

TableO1:NotesonTaxRevenueDataSeries

Country Years MaindatasourcesHistoricalarchive(HA)datasources

Kazakhstan 1993-2018 ICTD(1993-1998); OECD(1999-2018)

Kenya 1965-2018 HA(1965-2000); OECD(2001-2018) StatisticalAbstract

Korea 1965-2018 HA(1965-1971); OECD(1972-2018) KoreaStatisticalYearbook

Kosovo 2008-2018

Kuwait 1972-2018

HA(2008-2015); OECD(2016-2018)

DataretrievedfromDepartmentof FinanceandGeneralServices

HA(1972-1989); ICTD(1990-2018) GovernmentFinanceStatistics

Kyrgyzstan 1994-2018 ICTD(1994-2018)

Laos 1982-2018 ICTD(1982-2009); OECD(2009-2018)

Latvia 1994-2018 OECD(1994-2018)

Lebanon 1965-2018

HA(1965-2018); ICTD(1988-2001)

RecueildeStatististiquesLibanaises, StatisticalYearbook

Lesotho 1965-2018 HA(1966-1981); ICTD(1982-2018) StatisticalBulletin

Liberia 1970-2018 HA(1970-1988); ICTD(2000-2018)

EconomicSurvey,QuarterlyStatistical BulletinofLiberia,StatisticalBulletinof Liberia

Lithuania 1991-2018 HA(1991-1994); OECD(1995-2018) LithuaniaStatisticsYearbook

Luxembourg 1965-2018OECD(1965-2018)

Macedonia 1993-2018 ICTD(1993-2018)

Madagascar 1965-2018 HA(1965-1989); ICTD(1990-2018)

Malawi 1965-2018 HA(1965-2004); OECD(2005-2018)

Malaysia 1965-2018

Mali 1965-2018

InventaireSocio-Economique,Malagasy Budget,BudgetGeneraldel’Etat

MalawiStatisticalYearbook,CompendiumofStatistics,EconomicReport

HA(1965-1989); OECD(1990-2018) EconomicReport

HA(1965-1979); ICTD(1980-1999); OECD(2000-2018) ComptesEconomiquesduMali,AnnuaireStatistique

Commentsonseries

Independencein1991,butICTDcoveragebeginsin1993;socialsecuritycontributionsbeganin 1991,weusedatafromFisunogluetal.(2011);volatilityinindirecttaxrevenuesissignificant butplausible(WorldBank,2017).

Toassigninitiallyunallocabledirecttaxbetweenfirmsandindividuals,weuseinformationfrom Jetha(1966)andWanjala(2006)ontheincometaxschedules;gradualincreaseintax/GDPover thelongrunobservedinMachaetal.(2018)andOmondietal.(2014);possiblethatwearenot capturingsub-nationaltaxesinHAdata[flagged]

Goodmatchinlevelsforyearsofoverlap;interpolatefrom1968to1971;overalllowlevelsof revenueinthe1960saregenuineandreflectgovernmentpolicy;onlyaftermajortaxreformin 1967didtaxcollectionstarttosignificantlygrow(Yoo,2000);observedchangesincapitaltaxes collectedin1970saregenuine(KwackandLee,1992)

Governmentdatapriorto2008isscarce;accordingtoKoshutova(2004)andKritzer(2005), pensionsystemisfundedthroughgeneraltaxation;levelofCITasashareofGDPisconfirmed inHernandezetal.(2019)

Interpolate1975-1976;donotobservesocialsecuritycontributionsinHA,butitisplaceinhistoricalyears(SSA,2016),soweusedatafromFisunogluetal.(2011);largeresourcenationalization in1975,firms’incometaxdatafrom1972to1975shouldbeinterpretedwithcaution[flagged]

Datacoverageofpropertyandwealthtaxesonlybeginsin1995,butwecouldnotfindahistorical sourcetoconfirmifthisreflectsapolicyimplementation[flagged]

Whilesocialsecuritycontributionshaveexistedsince2001(SSA,2016),thereisnodatacovering thesecontributions[flagged];significantnon-taxsourcesofrevenueinthe1980s(Saignasith, 1997)

ICTDdataexistspriortoOECDcoverage,butitisnotdisaggregatedanddifficulttoreconcile withOECDnumbersinoverlappingyears.

SeriesusesHAdata,withICTDdatabetween1988and2001;turbulenttaxcollectionduringcivil warperiod(1975-1990),whereinformationinDimashkieh(1993)andHoury(1997)confirmthe levelsoftaxesbytype;socialsecuritycontributionsbeganin1963,weusedatafromFisunoglu etal.(2011);useinformationfromEkenetal.(1995)toconfirmlevelofCITcollectedpriorto 1993.

Datamissingin1978-1981,butduetounrestweleavedataempty(ratherthaninterpolate);spike inrevenuein1977iscorroboratedacrossdata-sets;licensingfeesconstituteslargesourceof revenueinearliestperiods(Cobbe,1981).

Importantgapincoveragebetween1988and2000-aturbulentperiodduringwhichrevenues werecollectedbutdivertedfromofficialuseandGDPdecreasedby90%(Atkinson,1997);drop inrevenuein1973-1974isgenuine.

Socialsecuritybeginsin1991,weusedatafromFisunogluetal.(2011).

Interpolateincometaxesfrom2003to2005;SSA(2005)confirmsthatsocialsecuritycontributions aresignificantinthecountry.

Interpolate1969-1971,notingthepoliticalinstabilityin1972,1974-1976,and1981-1983;usesocial securitydatafromFisunogluetal.(2011),startingin1965(SSA,2018)thoughdatafrom1965to 1969maybeestimatedinoriginalsource[flagged].

SocialsecuritycontributionsmissinginOECD,soweusedatafromFisunogluetal.(2011)for entireperiod,whichweresignificantinmorehistoricalperiods;spikeinPITrevenuein2001is genuine,likelyreflectstaxenforcementreforms;ShaliziandThirsk(1990)emphasizethatdirect incometaxeswereasignificantshareoftotaltaxesinthe1960s.

Interpolate1979-1980and1988,duetomissingHAdata;usesocialsecuritycontributionsdata fromFisunogluetal.(2011),butunreliableinperiodfrom1972to1980[flagged];totallevels matchwellinoverlappingyearsbetweenOECDandHA,highlightsthatthestampduty,which OECDclassifiesinas’othertax’,isclassifiedasunallocableincometaxinHA;dropinindirect taxesinlate1980sisgenuine.

LevelsmatchwellinoverlappingyearsbetweenHAandICTD,lendsconfidencetoHAsources eventhoughwecannotfindmultiplehistoricalsourcestocorroborate(Founou-Tchuigoua,1989); socialsecuritycontributionsbeginin1961(SSA,2019),weusedatafromFisunogluetal.(2011); OECDlistsnocorporatetaxin2000,thoughICTDdoes[flagged].

Comparisonwithotherstudies

Ourtax/GDPestimatesaresystematicallysmallerby2percentage pointsinthe1960sand1970scomparedtootherestimates(Wanyagathi,2015;KanjiandWanjala,2005),butthismayalsobedueto differencesintheunderlyingestimateofGDP(ourGDPestimates basedonWIDarelargerthanWorldBankestimates).

Tax/GDPestimatereportedinmid-1960sisapproximately1percentagepointhigherthanourdata.

Goodhistoricalmatchintax/GDPandsourcesfor1972-1976when comparedtoNyrop(1977).

Estimatesoftax/GDPinthe1990sareveryclosetodatareportedin BokrosandDethier(1998)andBarboneandPolackova(1996).

HistoricalestimatesinSaignasith(1997)arelargerthanourdata,but thosefiguresalsoreportfortotalrevenues(ratherthantotaltaxes).

Highlevelsoftax/GDPin1994-1995arecorroboratedinPolackova (1996).

HistoricalestimatesinSaleh(2004)arecomparabletoourseriesduringturbulentperiod(1975-1990).

Tax/GDPestimatesfromourdataare2percentagepointslowerin the1970sthanthenumbersreportedinCobbe(1981).

Levelsoftax/GDP,bothbeforeandafterthedata-gap,arecomparabletoestimatesinDaviesandDessy(2016).

Highlevelsoftax/GDPin1993-1994iscorroboratedinPolackova (1996).

Excludingsocialsecurity,tax/GDPlevelsarecomparabletoestimates since2005inWorldBank(2020).

Historicalestimatesoftax/GDPareslightlylowerthaninChipeta (1998)andShaliziandThirsk(1990),thoughthismayalsobedueto differencesinGDPvalues.

Limitedexistenceofstudiesforhistoricalcomparison.

Limitedhistoricalsources;ourestimatesarecomparabletoFounouTchuigoua(1989)forperiod1981-1989.

TableO1:NotesonTaxRevenueDataSeries

Country Years MaindatasourcesHistoricalarchive(HA)datasources

Mauritania 1986-2018

HA(1986-2006); OECD(2007-2018)

AnnuaireStatistique,BulletindelaDirectiondelaStatistiqueetdesEtudes Economiques

Mauritius 1973-2018 HA(1973-1989); OECD(1990-2018) DigestofStatistics

Mexico 1965-2018 HA(1965-1979); OECD(1980-2018)

Moldova 1992-2018 ICTD(1992-2018)

Mongolia 1994-2018ICTD(1994-2018)

AnuarioEstadisticodelosEstados UnidosMexicanos

Morocco 1965-2018 HA(1965-1999); OECD(2000-2018) AnnuaireStatististiqueduMaroc

Mozambique 1975-2018 HA(1975-2014); ICTD(2015-2018) InformacaoEstatistica

1991-2018 HA(1991-2018)

EstimateofRevenueandExpenditurefor theFinancialYear

Nepal 1976-2018 HA(1976-2005); ICTD(2006-2018) StatisticalYearbookofNepal

Netherlands 1965-2018

OECD(1965-2018)

NewZealand 1965-2018OECD(1965-2018)

Nicaragua 1965-2018

Niger 1965-2018

Nigeria 1965-2018

HA(1965-1989); OECD(1990-2018) CompendioEstadistico

HA(1965-1999); OECD(2000-2018) AnnuaireStatistique,BudgetAnnuel,

HA(1965-1991); ICTD(1992-2009); OECD(2010-2018) AnnualAbstractofStatistics

Norway 1965-2018OECD(1965-2018)

Commentsonseries

LevelsmatchwellinoverlappingyearsbetweenHAandOECD;’autresdroits’inHAislisted asincometaxinOECD,sowefollowthatassignmentinHA;interpolatemissingindirecttaxes in2000and2007-2008;limitedhistoricalsources,1986appearstobefirstyearthegovernment preparedacomprehensivebudgetstatement(Handloff,1990).

HAdrawsonhistoricalIMFdata;historicalgovernmentpublicationsmatchonlevelstoIMF data,butislesscompleteinyearsofcoverage;usedatafromFisunogluetal.(2011)forsocial securitycontributionspriortoOECDcoverage.

Interpolatesocialsecuritycontributions1973-1976;largeincreaseinindirecttaxesinearly1980s isgenuine(drivenbypolicyreforms),asisthedropinincometaxesin1980;initiallyunallocableincometax’impuestosobrelarenta’pre-1970(Aguilar,2003),assignsharestofirmsand individualsbasedondatapost-1970;unclearifwecapturesub-nationaltaxespre-1970[flagged].

ICTDmissesrevenuefromproperty-transactiontaxes,whichweretrievewithHAsources;use socialsecuritydatafromFisunogluetal.(2011),startingin1992.

ICTDdatagoesbackto1986,butdoesnotdisaggregateincometax;accordingtoIMFsources, capitalgainstaxisataxoncorporations;incorporateadditionaldataonproperty-wealthtaxes fromHAsources,initiallymissinginICTD;significant’othertax’categorybetween1993and 2011(includingstampduties,royalties,landtransactions),andimportantnon-taxrevenues.

SpikesinCITin1975and2009appeargenuine;’droitsd’enregistrement’inHAareclassifiedas propertytaxes;socialsecuritycontributionsbeganin1959,yetarenotobservableinHA,sowe drawdatafromFisunogluetal.(2011);interpolate1966,1971-1973,1995.

Interpolate1991and2001;useinformationfromFjeldstadandHeggstad(2010)toassignincome taxestofirmsversusindividualsinperiod2003-2009,andCastroetal.(2009)for1993-2007 period;HAsourcesforsocialsecurityraiseconcerns,sousedatafromFisunogluetal.(2011); dropinrevenuein2014-2015appearsgenuine,basedonoverlapofdatabetweenHAandICTD.

Startdatain1991,givenpoliticalinstabilityinprioryears(fullindependenceachieved),though ICTDdataexistsinmorehistoricalyears;perfectmatchinoverlappingyearswithICTDdata forindirecttaxes,thoughHAestimatesofincometaxesare1percentagepointofGDPhigher [flagged].

Matchinoveralltax/GDPlevelbetweenHAandICTDinoverlappingyears,butdiscrepancy inlevelbytypeoftax-thisisbecauseICTDclassifies’exciseonindustrialproduct’asindirect taxwhileHAclassifiesascorporateincometax[flagged];socialsecurityprogrambeganin1962 (SSA,2017),weusedatafromFisunogluetal.(2011);dropinPITandCITin2005aresignificant, havenotfoundadditionalsourcestocorroborate;property-wealthtaxesareaminusculefraction oftaxesin2005(HA),anddisappearentirelyinICTD(2006)[flagged].

Existsinitiallyunallocableincometaxes(category1300inOECDclassification),butastheyare taxesoninterest,dividendsandwithholding(onnon-residents’passiveinvestmentincome),we attributethemtocapitalratherthanlabor,minusculeinmagnitude.

HAuseshistoricalIMFdatainperiod1972-1989;multiplecurrencyre-denominationsandrevaluationsthataffecttax/GDPestimatesinlate1980sandearly1990s[flagged],butwecorroborate withhistoricalsources-includingthespectacularspikein1980s(Machado,2010;Irvinand Croes,1987;Gibson,1996);socialsecuritypolicybeganin1956(SSA,2017),weusedatafrom Fisunogluetal.(2011).

Interpolate1969-1972;usedatafromFisunogluetal.(2011)forsocialsecuritycontributionsprior toOECDcoverage,firstpolicyimplementedin1967(SSA,2017);HAandOECDmatchinyear ofoverlap,whichcouldsuggestlowlevelsinHAin1999aregenuine;tax’surunrole’between 1975and1998isassignedtoPIT;useinformationfromOECDinoverlappingyearswithHAto assign’autresrecettesfiscales’inHAin1999.

Interpolatepersonalincometaxesbetween1987and1990,interpolateoveralltaxes2008-2009; importantconcernsaboutextenttowhichresourcerevenuesaretrulyexcludedinHAseries, butmatchinlevelsisreasonablewithICTDinoverlappingyears[flagged];personalincometax representsminusculeshareoftotaltaxesin1980s,corroboratedinIBFD(2016);dropinindirect taxesbetween1965and1969appearsgenuine,relatedtopolicyreforms.

Corroboratesignificantcomponentofcorporateincometaxwhichreflectsvariationinproduction ofoilandgas.

Comparisonwithotherstudies

Limitedhistoricalsources;OualalouandJaidi(1986)discusslow overalllevelsoftaxcollectionhistorically,andWorldBank(2020) providesnodataonthecountry.

Limitedexistenceofstudiesforhistoricalcomparison.

OveralllevelsoftaxesmatchthehistoricalestimatesinMartinezVasquez(2001)forperiod1980-1999.

Tax/GDPlevelcomparablein1993toestimatesreportedinBarbone andPolackova(1996).

Comparabletax/GDPestimatesinWorldBank(2020),thoughthisis notsurprisinggivensimilarinitialdata-sources.

CITlevelsin1980sand1990sarecomparabletothosereportedby MinistryofFinance(2011).

Limitedhistoricalsources;ourhistoricalestimatesfor1993-2007are comparabletoLemgruberetal.(2010)andCastroetal.(2009).

Comparabletax/GDPestimatesfromWorldBank(2020).

Overallgoodmatchintax/GDPlevelswithWorldBank(2020), thoughlimitedcomparisonsavailableinearliesthistoricalperiods.

Mostimportantly,comparabletax/GDPestimatesineconomicturbulentperiodof1980s(Ocampo,1990;Machado,2010).

Limitedexistenceofstudiesforhistoricalcomparison.

Estimatesoftax/GDPinearly1990sareapproximately1percentage pointlowerthaninExpoandNdebbio(1996)andBaunsgaardetal. (2012).

Namibia

TableO1:NotesonTaxRevenueDataSeries

Country Years MaindatasourcesHistoricalarchive(HA)datasources

Oman 1972-2014 HA(1972-1989); ICTD(1990-2014) StatisticalYearbook

Pakistan 1965-2018HA(1965-2018)

Panama 1973-2018

PapuaNewGuinea 1976-2018

Paraguay 1965-2018

HA(1973-1989); OECD(1990-2018)

HA(1976-1999); OECD(2000-2018)

HA(1965-1989); OECD(1990-2018)

DetailedStatementofRevenueReceipts, StateBankofPakistanAnnualReport StatisticalSupplement

IMFGovernmentFinanceStatistics, IMFArticleIVReport

CompendiumofStatistics,Summaryof Statistics,EstimatesofRevenueandExpenditurefortheYear

AnuarioEstadistico

Peru 1965-2018

Philippines 1965-2018

HA(1965-1989); OECD(1990-2018)

HA(1965-1993); OECD(1994-2018)

Poland 1991-2018OECD(1991-2018)

Portugal 1965-2018 OECD(1965-2018)

Qatar 2000-2018ICTD(2000-2018)

Romania 1991-2018 ICTD(1991-2018)

Russia 1994-2018 HA(1994-1999); ICTD(2000-2018)

Rwanda 1967-2018 HA(1967-1995); OECD(1996-2018)

Samoa 1983-2018 ICTD(1983-2004); OECD(2005-2018)

SaudiArabia 1994-2018 ICTD(1994-2018)

AnuarioEstadistico

PhilippineStatisticalYearbook,Annual Budget,AnnualReportoftheCommissionerofInternalRevenue

HAuseshistoricalIMFdata,generalagreementwithotherhistoricalHAsourcesbutIMFdata carefullyandconsistentlyexcludesresourcerevenues;missingproperty-wealthtaxesinICTD [flagged],thoughHAseriessuggestsverysmallinmagnitude;additionalinformationusedto corroborateabsenceofpersonalincometaxrevenues(KPMG,2013);sharpdipin1990-2000 appearsgenuine;significantnationalizationreformsin1972,makingdatapriortothoseevents hardtoharmonize.

Combineseveralgovernmentpublicationstoensurewecapturenationalandsub-nationaltaxes inallperiods,withthelatteranimportantsourceoftotaltaxes(Hasan,1997);’incometax otherthancorporationtax’isnotentirelyPIT(similarchallengeinclassificationinIndia),use additionalinformationfromspecificyearstoassignshareswithinthiscategorytofirmsversus individuals.

HAuseshistoricalIMFdata;initiallyunallocablerevenuebetweenPITandCITinIMF,use additionalinformationfromGomezandSabaini(2005)andShome(1994)toallocate;declinein revenueinmid-1980sisgenuine,likelyreflectspoliticaltransitionandviolence.

Socialsecuritycontributionsstartedin1980(SSA,2016),usedatafroFisunogluetal.(2011)prior toOECDcoverage,thoughsmallinmagnitude;volatiletaxcollectioninmid-1970s,confirmed inDucThacandLim(1984).

Declineintaxesin1980sanduptickinearly1990sappeargenuine,likelyreflectpoliticaltransition period;jumpinsocialsecuritycontributionsin1998-1999isgenuine,reflectspolicyreforms(SSA, 2015);initialjumpintax/GDPin2016-2017wasduetoerroneousGDPvalueprovidedtoWID, hasbeencorrected.

Historicalvalues(1968-1978)shouldbetreatedwithcaution,givenstrongchangesincurrency andmacro-economicconditions[flagged];usedatafromFisunogluetal.(2011)forsocialsecurity contributionspre-OECD;jumpintotalrevenuesinyearoftransitionfromHAtoOECDisgenuine (HAmatcheswellthelevelofOECDinpost-1989years);OECDliststwotypesofwealthtaxes leviedatnationallevel,whileHAlistsonlyone[flagged],thoughsmallinmagnitudecompared tolocaltaxeswhicharecapturedinbothHAandOECD;interpolate1965-1967.

PossiblethatHAfailstocapturesub-nationaltaxes,whileOECDdoes[flagged],thoughsuch taxesareestimatedtorepresentlessthan5%oftotaltaxes;uptickintaxcollectionstartingin mid-1980sreflectsimportantpolicyreforms(ResideandBurn,2016).

Assigninitiallyunallocableincometax(OECDcategory1300)toindividualsversusfirmsonthe basisofinformationprovidedinOECDdataandcomparisonwithhistoricalIMFreports.

Socialsecuritycontributionsdoexist(Deloitte,2019),weusedatafromFisunogluetal.(2011); IMFreportslist’otherrevenues’whichareasignificantsourceoftotalrevenues,butthislikely correspondstoresourcerevenues[flagged];excisetaxwasintroducedin2019,corroborates indirecttaxeslistedinyearsofcoverage.

ICTDestimatesforsocialsecuritycontributionsarecomparabletoFisunogluetal.(2011),sowe donotdrawonadditionaldata-sources.

HAdrawsonIMFsources.IMFGovernmentFinanceStatistics,IMFArticle IVReport.

SituationEconomiqueetConjoncturelle,BulletindeStatistique,Rapportsurl’EvolutionEconomiqueetFinanciere,StatisticalYearbook

GovernmentstatisticspublishedduringHAcoverageshouldbeinterpretedwithcaution(Gale, 2005)[flagged];complexpropertytaxsysteminHA,butestimatesoflevelsarecorroboratedin Martinez-VasquezandWallace(1999)andChua(2003),andcomparisonwithTreisman(2000) suggestsHAseriesmeaningfullycapturessub-nationaltaxes.

Socialsecuritycontributionsbeginin1956(SSA,2017),weusedatafromFisunogluetal.(2011) priortoOECDcoverage;interpolate1990-1993,thoughconcernsexistsaboutdataqualitygiven unrestincountry[flagged].

Interpolate1984;observepropertytaxinearlyICTDyearsaswellasinallOECDyears,butsmall inmagnitude.

Non-taxrevenuescontributesignificantlytooverallrevenues;socialsecuritycontributionsdrawn fromFisunogluetal.(2011).Interpolate2006-2008.

Comparisonwithotherstudies

Tax/GDPlevelsfrom2000onwardarecomparabletoestimatesin BesleyandPersson(2014).

Historicaltax/GDPestimatesin1970sand1980saresystematically larger,by1-1.5percentagepoints,thanHasan(1997,2015)though thissourceonlycapturesnationaltaxes.

Historicaltax/GDPestimatecomparabletoestimatesinCEPAL (1978)priorto1975.

Historicallevelsandtrendsintax/GDParecomparabletoestimates reportedinDucThacandLim(1984)forperiod1965-1997.

Limitedexistenceofstudiesforhistoricalcomparison.

Limitedexistenceofstudiesforhistoricalcomparison.

Historicaltax/GDPestimatesaresystematicallywithin1percentage pointofestimatesinResideandBurns(2016),thoughonaverage15% smallerthanMitchell(2003).

Limitedexistenceofstudiesforhistoricalcomparison.

HistoricalestimatesarecomparabletonumbersinvariousIMFreports.

Tax/GDPestimatesinearlyhistoricalperiod(1966-1968)arevery closetothosereportedinCheliah(1971).

Tax/GDPestimatesapproximately2percentagepointslower(10%) thanestimatesinIMF(2006)forlate1990s.

Limitedexistenceofstudiesforhistoricalcomparison.

Senegal 1965-2018

HA(1965-1984); ICTD(1985-1998); OECD(1999-2018)

Serbia 2000-2018 ICTD(2000-2018)

BulletinStatistiqueetEconomique Mensuel,SituationEconomiqueetSocialeduSenegal

DropinrevenueinHAin1970swhichishardtoaccountfor,soreplacewithhistoricalIMFdata inthatperiod[flagged];Boye(1990)describesthetaxsystemasgenerallystableandsteadily growingin1960sand1970s,alsoconfirmsthatPIToutweighsCITintheseperiodsandoverall levelofincometaxesrelativetoGDP.

HAdataexistsinprioryears,butseriesbeginsin2000givenpoliticaltransition.

Estimatesofhistoricaltax/GDPsignificantlylowerthanestimatesin Cheliah(1971)forperiod1966-1968[flagged].

Estimatesoftax/GDPinmid-2000sisconsistentwithnumbersreportedinWorldBank(2007).

TableO1:NotesonTaxRevenueDataSeries

Country Years MaindatasourcesHistoricalarchive(HA)datasources

Seychelles 1980-2018 ICTD(1980-2007); OECD(2008-2018)

SierraLeone 1965-2018 HA(1965-1989); ICTD(1990-2018) EstimatesofRevenueandExpenditure

Singapore 1965-2018 HA(1965-1999); OECD(2000-2018) YearbookofStatistics

Slovakia 1994-2018 ICTD(1994);OECD (1995-2018)

Slovenia 1995-2018OECD(1995-2018)

SolomonIslands 1993-2018 ICTD(1993-2007); OECD(2008-2018)

SouthAfrica 1965-2018 HA(1965-1989); OECD(1990-2018) StatisticalYearbook

Spain 1965-2018 OECD(1965-2018)

SriLanka 1965-2018HA(1965-2018)

Sudan 1972-2018 HA(1972-1980); ICTD(1981-2018)

StatisticalAbstractofCeylon,Statistical Pocketbook

TheNationalAccountsandSupporting Tables

Swaziland 1969-2018 HA(1969-1998); OECD(1999-2018) EstimatesofRevenueandExpenditure, IMFGovernmentFinanceStatistics

Sweden

1965-2018

OECD(1965-2018)

Switzerland 1965-2018OECD(1965-2018)

Syria 1965-2007 HA(1967-2007) StatisticalAbstractofSyria

Taiwan 1965-2018HA(1965-2018) StatisticalYearbook

Tanzania 1965-2018 HA(1965-2018) StatisticalAbstract,FinancialStatement andRevenueEstimates

Commentsonseries

Socialsecurityprogrambeginsin1971(SSA,2017),usedatafromFisunogluetal.(2011)priorto OECDcoverage;PITcollectionsarepracticallyzeroinsomeyearsbetweenlate1990sandearly 2000s,whichappearsgenuine.

UsehistoricalIMFdatawithinHAseries,between1974and1989,andHAandIMFperfectly matchonlevelsandtypeoftaxin1974;socialsecuritycontributionsbeginin2001(SSA,2017), priortothatobservepayrolltaxreportedinICTDandHA;interpolatesplitbetweenPITand CITin1994-1997.

InHAseries,useadditionalinformation(AsherandTayabji,1980;TanziandShome,1992)to assigninitiallyunallocableincometaxesbetweenPITandCIT;usedatafromFisunogluetal. (2011)forsocialsecuritycontributionspriortoOECDcoverage;sharpdipin1980sreflectgenuine taxpolicyreforms(JoonChien,1996);basedonoverlappingyears,suggeststhatHAismissing ataxonfinancialandcapitaltransactionswhichiscoveredinOECD[flagged],butHAcovers other,moresignificant,wealth-propertytaxes(Haqetal.,1996;Bird,1991).

ICTDandOECDdatamatchperfectlyin1995.

ICTDandOECDdatamatchperfectlyin1995,butICTDdatapre-1995doesnotprovidesufficient disaggregationbytaxtype;SSA(2016)confirmssignificanceofsocialsecuritycontributions;drop inCITrevenueinmid-late2000sappearsgenuine(WorldBank,2020).

ICTDdataexistsin1980sbuthasnoconsistentdis-aggregationbetweenPITandCIT;interpolate in1996;ICTDlikelyonlycoversnationaltaxes[flagged].

HigherlevelinOECDdatathanHAatyearoftransitioningdata-source,whichcoincideswith importantindirecttaxreform,whichisalsotaxcategorywherediscrepancylies,butnoyearsof data-overlaptofurtherinvestigate[flagged];reasonableconfidenceindata’sabilitytoexclude resourcerevenues,corroboratedinadditionalsources(SouthAfricaRevenueServices,2015); Ndlovu(2017)referstoapay-as-you-earnsocialsecurityschemedatingbackto1963,whichwe donotseparatelyobserveinHAbutwhichcouldbeincludedunderPITcategory[flagged].

Socialsecurityfrom1958,weusedatafromFisunogluetal.(2011);transactionandpropertytaxes prominentfrom1982onward,unabletoconfirmifabsencepre-1982isduetopolicy[flagged].

ChallengingtoassigninitiallyunallocableincometaxestofirmsversusindividualsinHAdata; usesomeIMFdatainHAcoverage,butgenerallydifficulttofindreliableinformationinhistorical periods[flagged];usedatafromFisunogluetal.(2011)forsocialsecuritycontributions.

HAdrawsonhistoricalIMFdatabetween1972and1989;spikeinrevenuesin1970sappears genuineandrelatedtoeconomicchanges;usedatafromFisunogluetal.(2011)forsocialsecurity contributionspriortoOECD;taxesoninternationaltradesubstantialin2000s,corroboratedin Ayoki(2018).

WithholdingtaxoninterestincomeinfinancialinstitutionsisunallocablebetweenPITandCIT withoutfurtherinformation.

HAdataextendsfurtherback,butseriesstartsin1967givenpoliticaltransition;dropinPITin 2004appearsgenuine,confirmedinICTDdata;largeincreaseinCITfrom1980to1985reflects changesinresourceenvironment,butunclearifourseriesentirelyexcludesresourcerevenues [flagged];socialsecurityprogrambeganin1959(SSA,2018),weusedatafromFisunogluetal. (2011)forentireseries.

Spikeintaxesin2000appearsgenuine,reflectseconomicchanges;nodatafromanyofmain sourcesonsocialsecuritycontributions,andofficialgovernmentrecordsleavethereporting entryforsuchcontributionsblank;eithersocialsecurityisfundedthroughother,generaltax sourcesorsocialinsuranceschemesaredecentralizedandnocentralizedstatisticsexist(Chow, 2001)[flagged].

Interpolate1972,1977,1993-1995;PITandCITbundledinonereportedcategorybetween1965 and1974,assumesamesplitasreportedindisaggregateddatain1975;uptickinrevenue collectioninearly1990sattributedtomultiplereforms(IMF,2009).

Comparisonwithotherstudies

Limitedhistoricalcomparisonstootherstudies,butadditionalIMF dataprovidescomparableestimatesin1980s.

Limitedexistenceofstudiesforhistoricalcomparison.

Thailand 1965-2018 HA(1965-1999); OECD(2000-2018) StatisticalYearbook

Goodmatchonleveloftax/GDPbetween1960sandearly2000swithJansenKhannabha(2009), approximately1percentagepointloweronaverageinourseries;goodmatchinlevelsbytax-type withMatsumoto(2018).Interpolate1972,1980,1985,1987,1994,1996-moresothaninanyother country[flagged]

Comparablelong-runseriesoftax/GDPasreportedinWorldBank (2020).

Estimatesoftax/GDPin1990sarecomparablewithWorldBank (2020).

Limitedexistenceofstudiesforhistoricalcomparison.

Comparabletax/GDPestimatesin1970swithNdlovu(2017)and Kochetal.(2003),in1990swithCentralReserveBank,thoughlower estimatesthaninGlendlay(2008).

Ravinthirakumaran(2011)reportscomparabletax/GDPnumbersfor theperiod1977-2009.

Limitedexistenceofstudiesforhistoricalcomparison.

Limitedexistenceofstudiesforhistoricalcomparison.

Limitedexistenceofstudiesforhistoricalcomparison.

Limitedexistenceofstudiesforhistoricalcomparison.

Estimatesoftax/GDPare1-2percentagepointslowerthanreported inFjeldstad(1995)during1986-1990period,andlowerthaninOsoro (1993)forlate1980speriod,thoughgoodmatchonlevelsandtrends withIMF(2009)between1986and2008;differenceinestimatemay partlybedrivenbydifferencesinestimatesofGDPvalue(WIDand WorldBankestimatesdifferbyalmost25%)[flagged].

TableO1:NotesonTaxRevenueDataSeries

Country Years MaindatasourcesHistoricalarchive(HA)datasources Commentsonseries

Timor-Leste 2006-2018 HA(2006-2018)

DataretrievedfromonlineannualbudgetspublishedbyMinistryofFinance

Togo 1966-2018 HA(1966-1999); OECD(2000-2018) AnnuaireStatistique

TrinidadandTobago 1965-2018

Tunisia 1965-2018

Turkey 1965-2018

Uganda 1965-2018

HA(1965-1989); OECD(1990-2018) AnnualStatisticalDigest

HA(1965-1999); OECD(2000-2018) AnnuaireStatistique

OECD(1965-2018)

HA(1965-1991); OECD(1992-2018)

FinancialSummaryandRevenueEstimates

Ukraine 1993-2018 ICTD(1993-2018)

UnitedKingdom 1965-2018OECD(1965-2018)

UnitedStatesofAmerica 1965-2018 OECD(1965-2018)

Uruguay 1972-2018 HA(1972-1989); OECD(1990-2018) AnuarioEstadistico

Uzbekistan 1993-2018 ICTD(1993-2018)

Vietnam 1994-2018 HA(1994-2002); OECD(2003-2018)

Yemen 1990-2012

AnnuaireStatistique,MonthlyBulletin ofStatistics,VietnamStatisticalDatain the20thCentury,StatisticalYearbook

HA(1990-1997); ICTD(1998-2012) StatisticalYearbook

Zambia 1965-2018HA(1965-2018) FinancialReport,FinancialStatisticsof GovernmentSector

Databeginsafterindependence;socialsecuritycontributionsbeganin2016(ILO,2017);initially unallocableincometaxisawithholdingtaxonpersonalincomeandhenceclassifiedunderPIT; countrystronglydependentonresourcerevenues(Doraisami,2009;Scheiner,2015).

Interpolate1981-1982;’transactiontax’inHAisclassifiedasindirecttax,ratherthanpropertywealthtax(Ghura,1998);mid-1960stolate-1960swereweremarkedbypoliticaltransition andcoupsd’etat,cautionreliabilityofdataandabsenceofhistoricalestimatestocorroborate [flagged];socialsecuritybeganin1968(SSA,2017),usedatafromFisunogluetal.(2011)prior toOECDcoverage.

Largeincreaseinearly1970sseemstobedrivenbyeconomicvolatilityandincreasedinflation withstrongincreaseinCITcollection;dipinCITcollectioninlate1990smaybegenuine(appears inbothOECDandofficialgovernmentrecords),butunclearnatureofshock;historicalIMFdata corroborateslevelsofPITandCITin1970s.

UsedatafromFisunogluetal.(2011)forsocialsecuritycontributionspriortoOECDcoverage, whichisotherwisemissinginHA;initiallyunallocableincometaxreportedinHAincertain years,limitedhistoricalsourcestospecifyallocation[flagged].

OECDdataincludeslocaltaxessincelate1970s.

UsehistoricalIMFreportstoassignincometaxbetweenindividualsandfirmsinHAperiods; interpolate1984,1991;usedatafromFisunogluetal.(2011)forsocialsecuritycontributions priortoOECDcoverage;largeandsustaineddropintaxcollectioninlate1970slikelydrivenby politicaltransition.

HAisavailablefromearly2000sonward,butcomparableinlevelswithICTDandweprefer tominimizetotalnumberofsources;ICTDnumbersforsocialsecuritycontributionsarecorroboratedingovernmentdocuments,anddipinlate1990sisobservedinadditionalsources (UN-SNAandFisunogluetal.,2011).

EarlierHAseriesexist,butimpliedlevelsoftax/GDParenotcomparabletohistoricalestimates (LotzandMorss,1967),webeginseriesin1972whenthereisstrongerconsistencywithother studies;verylimitedcollectionofPITinhistoricalperiodsisconfirmedinIMF(1992);CIAT corroboratesincometaxsplitbetweenPITandCITin1990s.

ICTDincludessocialsecuritycontributionsandwhichmatchwellinlevelswithFisunogluetal. (2011),includingtheriseincollectionin2000s;interpolate2013-2014.

HAsourcesrelyonIMFdata;priortoDoiMoireformsinlate1980s,revenueswerelargely generatedfromnon-taxsources;socialsecuritycontributionslikelyinplaceduringHAcoverage, butnodatainHAseries[flagged];Bhattarai,NguyenandNguyen(2018)corroboratesplit betweenPITandCITbetween1994and2010.

Nodatapast2012,givenpoliticalunrestandviolence;goodmatchonlevelsbetweenHAand ICTDinoverlappingyears;usedatafromFisunogluetal.(2011)forsocialsecuritycontributions.

UsesocialsecuritycontributionsfromFisunogluetal.(2011)asitexistsduringfullperiod, corroboratedwithHAestimatesinspecificyears;limitedcomparisonwithICTDdataasit appearstoincluderesourcerevenuesinCITnumbersincertainyears[flagged].Interpolate 1986,1990-1991.

Comparisonwithotherstudies

Comparabletax/GDPwithseriesreportedinIMF(2019),though muchsmallerthanestimatesinWorldBank(2020),thelattermay includeresourcerevenues.

Overalltax/GDPlevelsarecomparabletoGhura(1998)andStotsky andWoldemariam(1997)during1980sand1990s.

Closematchinlevelsoftax/GDPduring1960sand1970swithLotz andMorss(1967)andChelliah(1971).

Tax/GDPlevelscomparableinlate1960sandearly1970swithhistoricalIMFreports.

Limitedexistenceofstudiesforhistoricalcomparison.

Polackova(1996)tax/GDPestimatein1993-1994iscomparable.

Zimbabwe 1980-2018 ICTD(1980-2018)

Datacoveragebeginsafterindependence;interpolate1998;socialsecuritycontributionsbegan in1989(SSA,2017),datamatcheswellbetweenICTDandFisunogluetal.(2011);increasein unallocableincometaxesbetween2010and2018,butlimitedadditionalinformationtoclarify allocationbetweenindividualsandfirms;collapseintaxcollectioninlate2000sdrivenby economicconditions.

Historicalestimatesoftax/GDP,centeredonyearofoverlapbetween OECDandHA,matchwithdatareportedinIMF(1989)andOECD (1990).

Ourtax/GDPestimatesareslightlyhigherthanGrigorianand Davoodi(2007)for1998-2004period,andslightlylowerthan MokhtariandAshtari(2012)for2005-2010period.

Closetax/GDPestimatesreportedinCottarelli(2011)fortheperiod between2001and2008.

Tax/GDPestimatesarecomparabletothosereportedinIMF(2002) forlate1990speriod,generallylimitedhistoricalcomparisons.

Comparabletax/GDPestimatesin1990-2004withDiJohn(2010)and Weeksetal.(2006),lowertax/GDPestimatethaninColclough(1988) for1975-1985periodthoughthismaybeduetoouromissionof category’miscellaneouscapitalreceipts’inHAwhichwedonot countastaxrevenue.

GoldbergandPavcnik(2006)

GoldbergandPavcnik(2006), Dix-CarneiroandKovak(2017)

Brandtetal.(2017)

FeenstraandHanson(1997); GoldbergandPavcnik(2006,2016)

GoldbergandPavcnik(2016), McCaigandPavcnik(2018)

Notes: Thistableshowstheseventreatedcountriesandthethreecountrieswiththelargestweightinthesyntheticcontrolgroupforeachtreated countryandoutcome(tradeopenness, ETRK , ETRL).Foreachoutcome,thepoolofpossibledonorcountriesconsistsofallnon-treatedcountries withabalancedpaneloverallthepre-eventperiodsthatareusedinthematchingprocedure.ThistableisdiscussedinSection5.1.

TableO3:HeterogeneityImpactsofTradeonTaxationbyCountryCharacteristics

Hc :

PanelA:CITrate(first-diff).

Trade

-0.003 (0.016) (0.038)

Trade∗Hc -0.022 -0.110** (0.065) (0.051)

Impliedcoef.for

Tradein Hc (0.057) (0.027) 1st-stageKleibergen- 7.30

PappF-statistic

PanelB: ETRK Trade

0.511** (0.210) (0.248) Trade∗Hc

-0.374 (0.540) (0.340)

Impliedcoef.for -0.367 0.137 Tradein Hc (0.401) (0.123)

1st-stageKleibergen- 7.01 11.41 PappF-statistic

PanelC: ETRL

0.190*** 0.127 (0.065) (0.129)

Trade∗Hc 0.067 0.187 (0.242) (0.209)

Impliedcoef.for 0.258 0.315*** Tradein Hc (0.216) (0.109)

1st-stageKleibergen- 7.01 11.41 PappF-statistic

Notes: Thistablepresentsresultsfromestimatingheterogeneouseffectsoftradeonoutcomesinthefull sampleofdevelopedanddevelopingcountries.Tradeisthesumofexportsandimportsdividedbynet domesticproduct.WeestimateanIVsimilartothatinTableA7butwheretheinteractiontermisan indicatorforsmallpopulation(column1),oranindicatorforcapitalopenness(column2).Smallpopulation takesavalueof1ifthecountry’spopulationin2018wasbelow40million.Capitalopennesstakesavalue of1ifthecountry’saveragevalueoftheChinn-Itoindex(Chinn&Ito,2006)liesabovethemedianvalueof allcountry-years.Bothoftheseheterogeneitydimensionsarethereforecountry-specificbuttime-invariant. Thesamplesizeissmallerincolumn(2)duetodata-availabilityoftheChinn-Itovariable.Thepanelsdiffer byoutcome:panela)isthefirst-differencedcorporateincometax(CIT)rate;panelb)istheeffectivetax rateoncapital, ETRK ;panelc)istheeffectivetaxrateonlabor, ETRL.Atthebottomofeachcolumnand panel,wereporttheimpliedcoefficientandestimatedstandarderrorbasedonthelinearcombinationof the Trade andthe Trade*Hc coefficients.Wealsoreportthe 1st-stageKleibergen-PaapF-statistic.Formore detailsontheIV,seeSection5.2.*p<0.10**p<0.05***p<0.01.Standarderrorsinparenthesesareclustered atthecountrylevel.

O.1EventStudy:FurtherDetails

Sampleconstruction Oursampleisconstructedbyapplyingasyntheticmatchingproceduretoeverytreatedcountry,foreachoutcomeofinterest.Thedonorpool(theset ofallcontrolcountriesfromwhichtochoosethesyntheticcontrolgroup)hastobefully balancedinallpre-eventperiods.Wethenpooltogetherallseventreatedcountriesand theirsyntheticcontrolunits.Usingthispanel,weestimatetheDiD:

Here, βDiD canbeinterpretedasanaveragetreatmenteffectoverthefirst10eventperiods(e)aftertreatment.Werunbothregressions—theeventstudyandtheDiD regression—onthesetofmainoutcomes,andclusterstandarderrorsatthecountry level.Statisticalinferencebasedonsmallsamplesizeshouldbeapproachedwithcaution (Abadie,DiamondandHainmueller,2010):wealsoreportstandarderrorsfromthewild bootstrap(Cameron,Gelbach,andMiller,2008)inTableA1. Moreover,weusetheimputationmethodby Borusyaketal.(2021) toreportaverage treatmenteffectscomparableto βDiD withatechniquethatdealswithissuesfortwowayfixedeffectsandheterogeneouseventtiming.Theapproachprovidesatransparent alternativemethodtothedifference-in-differenceequationspecifiedabove.Theaverage treatmenteffect(TE)iscalculatedinthreesteps:

1. Weuseuntreatedcountriesaswellastreatedcountriesintheyearsbeforetreatment, toestimateunitand(relative)yearfixedeffects:

if e< 0 or Dc =0.Tobringusclosertotheapproachdevelopedby Borusyaketal. (2021), weincludeyearandrelativetimefixedeffects.

2. Withthefittedvalues ˆ θt and ˆ κc,wenowimputeunitspecifictreatmenteffects:

3. Thefinalstepistoaverageoverthosecoefficientstoproduceatreatmenteffect.We reportunweightedaverages,butheterogeneityintreatmenteffectscouldbeaccounted forbyspecifyingweights.

O.2InstrumentalVariablesforTrade

Inthisappendix,weoutlinetheconstructionofthetwoinstrumentalvariables.Both instrumentsaredrawnfrom Eggeretal.(2019), whoprovidefurtherdetails.

Instrumentbasedonquantitativetrademodels Thefirstinstrumentleveragesthestructureofgravitymodelsingeneralequilibrium.Thesemodelspermitcalibrationofcountry pair-year-specifictradecostsfromtradedata,relyingonthreekeyassumptions:(i)producersareperfectlycompetitiveandmakezeroprofitsorchargeaconstantmarkup;(ii) tradecoststaketheicebergform;and(iii)aggregateexpenditureanditsallocationacross productsareseparable.Theseassumptionsimplythatbilateralconsumptionsharestowardscountry o byconsumersincountry c inyear t,denoted πcot,havemultiplicative componentsthatareexporter-year-specific(ψot),importer-year-specific(ιct)andpair-yearspecific(βcot):

Thecomponent ψot isproportionaltocountry o’ssupplypotentialandcapturesproductioncostsandgross-of-taxfactorincome—andmightbeinfluencedbybothcapital andlabortaxation.Thecomponent ιct dependsontheconsumerpriceindex,whichvaries acrossyearsandcountries.67 βcot capturestradefrictionsacrosscountry-pairsandtime.68 Theproductofthenormalizedsharesgivesthebilateralfrictionsofimporting-exporting country-pairsatapointintime:

Finally,weuse βcot · βoct tocomputetheaverage ct-specificcostsofexportingand importing,whichconstitutestheinstrument:

Notethatallexporter-yearandimporter-yearfactorsareremovedfromtheinstrument. Thisinstrumentisvalidsolongasthe distribution oftradecostsamongcountry-pairs(not itslevel)isnotinfluencedbytheleveloffactorincomesoreffectivetaxburdens.Constructingthisinstrumentrequiresdataoncountry-pairtradeflows:weuseUNCOMTRADE datatoconstructalargesampleofbilateralconsumptionshares.69 First-stageregressions with Zgravity ct areshowninTableA2.

67Both ψot and ιct maycapturecountry-year-specifictradecosts,butthepair-specificcomponent βcot isfree ofsuchcountry-yearspecificinfluence.

68Eggeretal.(2019) exploitthemultiplicativemodelstructureabout πcot torecovermeasuresof βcot.They assumethattransactioncostsbetweendomesticsellersandcustomersarezero,suchthat βcct =1.Both theimporter-yearcomponentandexporter-yearcomponentcanthenbeeliminatedbynormalizingimport andexporttradesharesbytheimporterandexporters’consumptionfromdomesticsellers.

69WeaugmentourrawdatafromCOMTRADEwithdatafromHarvardGrowthLab,whoharmonized importer-andexporter-reportedtradeflowstoexpandthecoverageandimprovetheprecisionofcountrypartner-yeartradeflowestimates.

Instrumentbasedonglobaloilprices&transportdistances Thesecondinstrument exploitsspatialheterogeneityacrosscountriesinawaythatinteractswithoilpriceshocks. Thisinstrumentisbasedonglobaloilpricechangesovertimeandwithin-countrytransportationdistancesfromcitiestothenearestport.70 Theinstrumentisthevarianceofthe productoilprice

where dc istheaveragecity-portdistanceincountry c.Thisvarianceincreasesincountries whosemaincitiesarefarfromthenearestportandfarfromeachother,whichimplies alargerchangetotransportationcostsfollowingaglobaloilpriceshockinspread-out countriesthanincountrieswithconcentratedpopulations.Itisthistransportation-cost shockthattheinstrumentcaptures.71

Thissecondinstrumentdoesnothingeontheoreticalassumptions.Instead,this instrumentisvalidsolongasthecountry-specificdistributionoftrade-costs,inducedby theinteractionbetweenglobaloilpriceshocksandacountry’sfixedspatialconcentration, isnotcorrelatedwithcontemporaneouschangesinfactorincomesandeffectivetaxrates. First-stageresultsfor Zoil dist ct arepresentedinTableA2.

70Fortheformer,weretrievetheOPECReferenceBasketbenchmarkworldpriceofcrudeoil.Forthelatter, wemeasureroaddistancesfromthethreelargestcities(accordingtoUNpopulationstatistics)totheir nearestport,usingSeaRatesinternationalshippinglogisticscalculators.

71Alternatively,onecouldmeasurethevarianceindistanceandthenmultiplyitbytheglobaloilprice.The distributionofthevarianceinstrument Zoil dist ct acrosscountry-yearswouldnotchange;theonlyimpact wouldbealevel-shiftbytheprice.Weconsiderthemainapproachtomorecloselycapturethesensitivityof transportcoststospatialconcentration,butresultsbasedonthisalternativevariancemeasurearesimilar.

O.3ComparisonwithPre-existing ETR Series

Wecompareourmethodologytopre-existing ETR series.Themaindifferencesare summarizedinTableB3.

In McDaniel(2020), updatedfrom McDaniel(2007), therearetwomaindifferences withourbenchmarkmethodology.First,theauthorassignsthecapital-shareinmixed incomebasedontheobservedfactorshareintherestoftheeconomy,whileourbenchmark assignsafixedshare(25%).Second,theauthorassumesthatlaborandcapitalinPITare taxedatthesamerate.Thisisthesameassumptionasin Mendozaetal.(1994), and differsfromourbenchmarkwherewecreateanallocationofPITtocapitalthatvariesby countryandyear, (1 λPIT,ct).Thesemethodologicaldifferencesarereasonablycaptured inourrobustnesschecks.Forthefirstdifference,notethatthischoiceeffectivelyamounts tousingtheobservedcapital-shareinthecorporatesectortoassignthecapitalsharein mixedincome(seeequation3in McDaniel(2007)).Thiscorrespondsdirectlytooneof ourrobustnesschecks(PanelBinFigure3).

Wecanrelatetheseconddifferencetoourrobustnesscheckwherewevarythecapital shareofPITfrom0%to30%(PanelAinFigure3).Iflaborandcapitalfacethesametax rate,thenthecapitalshareofPITincreasesinthecapitalfactorshareandintheshare ofcapitalthatistaxable.Usingtheempiricalmeasuresfortaxablesharesestablishedin theUS (Pikettyetal., 2018), andassumingbothfactorsfacethesamerate,thecapital shareofPITthatwouldresultatthe 99th percentileofobservedcapitalfactorshares inourfullsampleis 1 λPIT =0 305.Inotherwords,ourrobustnesscheckwhich implements 1 λPIT =0.30 constitutesameaningfulupperboundonthecapitalshare inPITthatwouldresultfromanyobservedfactorsharesinoursampleandassuming capitalandlaborpaythesamerateandhavetaxablesharesasmeasuredin Pikettyetal. (2018). Ofcourse,undertheassumptionthatbothfactorsarefullytaxable(unrealistic givenempiricalfindingsin Jensen(2022))andfacethesamerate,thecapitalshareofPIT wouldbeequaltotheobservedcapitalfactorshare.Ourbenchmarkmethodologytakesa steptowardstryingtomeasurethetaxablefactorsharesastheyvaryacrosscountriesand time,witha 1 λPIT,ct atthe 99th percentilethatequals0.32.Futureworkcouldimprove onthismeasurement,bycombiningadditionalinformationfromnationalaccountsand taxrecords.

The ETR seriesthatwouldresultfromapplyingthemethodologyin McDaniel(2020) tooursampleisthereforereasonablyboundedbyourrobustnesscheckswhichassign capital’sshareofmixedincomebasedonthecorporatecapitalshare,andwhichvarythe capitalshareinPITbetween0%and30%.

Inadditiontothesemaindifferences, McDaniel(2020) considerspropertytaxespaid byhouseholdsasconsumptiontaxesandpropertytaxespaidbybusinessesascapital taxes,whileourseriesconsidersallpropertytaxestobecapitaltaxes.Thisdifference isunlikelytobequantitativelysignificant.Finally, McDaniel(2020) usestaxdatafrom nationalaccounts,whilewerelyonvariouspublicfinancesources.

InPanelBofFigureB1,weuse McDaniel(2020)’sspecificsample.Thetrendsare similarbetweenseries.Whenweightsareapplied,ourbenchmarkseriesisonaverage 18.75%higherinlevelsthan McDaniel(2020). Thiswedgearisesfromthemethodological

differences(whichwecanaccountforinourrobustnesschecks),andpossiblyfromthe differencesintaxdata-sources.

In KostarakosandVarthalitis(2020), whichappliesthemethodologyin Careyand Rabesona(2004) todatafrommorerecentyears,thereisonemainmethodologicaldifferencewithourbenchmark.Inparticular,theauthorsestimaterelativelaborincomeof self-employedonthebasisofobservablecharacteristicsandacomparisonwiththewage ofemployees,whileourbenchmarkmethodassignsafixedlaborsharetomixedincome. However,thisalternativemethodcorrespondscloselytothemethodin ILO(2019), which weimplementasarobustnesscheck.Thus,thisrobustnesscheck(PanelBofFigure3) meaningfullycapturesthe ETR seriesthatwouldresultfromapplyingthemethodology in KostarakosandVarthalitis(2020) tooursample.

Oneadditionaldifferenceisthat KostarakosandVarthalitis(2020) assumesocialsecuritycontributionsaredeductiblefromthetaxableincomeofhouseholdswhileourmethod followsnationalaccountsconventionandassumestheyarenot.Weconfirmthatimplementingthischangeinourseriesdoesnotmeaningfullyaltertheresults(availableupon request).Finally, KostarakosandVarthalitis(2020) drawtheirtaxrevenuedatafroma differentsource(Eurostat)thanus.

InPanelAofFigureB1,weuse KostarakosandVarthalitis(2020)’sspecificsample. Thetrendsaresimilarbetweenseries.Whenweightsareapplied,ourbenchmarkseries isonaverage14.2%lowerinlevelsthan KostarakosandVarthalitis(2020). Thiswedge arisesfromthemethodologicaldifferences(whichwecanaccountforinourrobustness checks),andpossiblyfromthedifferentialtreatmentofsocialsecuritycontributionsand fromthedifferentdata-sourcefortaxrevenue.

O.4Discussionof ETRK C

Ourmeasureofthebackward-lookingaverageeffectivetaxrateoncorporateprofits, ETRK C ,isrelatedto,butalsodistinctfrom,theforward-lookingmeasuresofthestatutory taxburdeninthecorporatesectorindevelopingcountries(Section2).Therearetwomain reasonswhythesemeasuresdiffer.

Thefirstreasonisthatthemeasureofcorporateprofitsin ETRK C isbasedonnational accounts,whichdiffersbothempiricallyandconceptuallyfromhowcorporateprofitsmay bemeasuredusingtaxdata.Empirically,thedata-sourcesfornationalaccountsinclude corporatetaxreturnsbutalsonon-taxsourcessuchasindustrialcensusesandsurveys. Themeasureofcorporateprofitsbasedonnationalaccountsmaythereforeincludeprofits whicharenotreportedintaxreturns.Indeed,thenationalaccountguidelinesexplicitly trytoaccountformis-reportedprofitsandcorporateprofitsareusuallyfoundtobelarger invaluewhenmeasuredfromnationalaccountsthanfromtaxreturns(Lequiller&Blades, 2014).Forthissamereason,constructinganappropriately-weightedbackward-looking firm-leveleffectivetaxratebasedontaxespaidandprofitsreportedintaxreturnsmay notgivethesamevalueas ETRK C .Thisfirm-levelmeasureisanalyzedinSection6;see alsoDyrengetal.(2017)andEggeretal.(2009)forfirm-levelestimatesinlargesamples focusedondevelopedcountries.

Therearealsoconceptualdifferences,whicharediscussedindetailin IMF(2014), Lequiller&Blades(2014)andUeda(2018).Consumptionoffixedcapitalinnationalaccountsadjustsforinflationandisestimatedaccordingtophysicalandeconomiclawsof depreciation,whereascompaniessometimesmeasuredepreciationwithoutregardtoinflationandmayshortenorlengthenthetimeofamortizationaccordingtotaxadvantages. Inaddition,inventoryappreciation(thenetgainininventory)isusuallyaccountedfor incompanyprofitsbutnotinnationalaccounts.Moreover,expenditureonintellectual propertyiscountedasinvestmentinnationalaccounts,butmaybelistedasintermediate consumptionbycompaniesontheirtaxreturns.Finally,somesourcesofpropertyincome (e.g.investmentvaluationincreases;resourcerentspaidvs.received)andcapitalgains (e.g.saleofsubsidiariesorcurrencytransactions)arecountedincompanyprofitsbutnot innationalaccounts.

Thesecondreasonisthatthecorporatestatutorytaxburdenvariesacrossfirmsdueto economicvariables,includingsector,sizeandprofitability (R.Kumar&James, 2022,Devereux,GriffithandKlemm,2004). Changesintheseeconomicvariableswillbereflected in ETRK C ,butmaynotbefullycapturedinthestatutorymeasures.

Relationbetween ETRK C andCITefficiency Ourmeasureoftheaveragecorporate effectivetaxrate, ETRK C ,isrelatedtoempiricalworkdoneby IMF(2014) tomeasure CIT-efficiencyindevelopingcountries.IMFdefinesCIT-efficiencyasactualcorporate incometax(CIT)revenuesdividedbytheproductofthestandardCITrateandthegross operatingsurplusofcorporationsfromnationalaccounts, OSCORP .CIT-efficiencyis thereforerelatedto ETRK C asfollows:

CIT-efficiency = ETRK C · 1 CITrate

WehaveinformationontheCITrate,sowecancomputetheCIT-efficiencymeasure usingourdata.Inturn,wecanlimitthecomparisontothesampleofdevelopingcountries coveredintheIMFstudy(’Non-OECD’countries).Beforecomparingthetwoseries,we notetheremainingmethodologicaldifferences:

1. Ourmeasureof OSCORP isnetofcapitaldepreciation,whiletheIMFmeasureis not.Thislikelyleadsourvariabletobehigherinlevels,thoughitisnotclearhowit wouldaffecttrendsovertime(seeAppendixIVintheIMFstudy).

2. OursampledoesnotcontaindataforMalta,whichisoneofthedevelopingcountries (’Non-OECD’)includedintheIMFsample.Moreover,wecanlimitthecomparisonsampletotherangeofyearsindicatedintheIMFstudy(1989-2011),butwe cannotverifythatourcomparisonsamplecontainsexactlythesamecountry-year observations.

3. IntheIMFstudy,thedataforboththeCITrevenuecollectedandtheCITrateare takenfromtheIMF’sFiscalAffairsDepartment.OursourcesforbothCITrevenue andtheCITratediffer(seeSection3and6inpaperfordetails).

TheaverageunweightedCIT-efficiencyseriesthatresultsfromusingourdatabut restrictedtotheIMFsampleiscomparedtotheIMFseriesinFigureO10.Ourvaluesarea littlehigherinlevelsonaverage,whichmayreflectthedeductionofdepreciation.Despite this,aswellasdifferencesinunderlyingdata-sources,thetrendsmatchwellbetweenthe twoseries.

Inregressionresultsnotshown,wefindthattradehasapositiveimpactontheCITefficiencymeasure.Thisisconsistentwiththehypothesisinthemainpaperthattrade improveseffectivecorporatetaxationindevelopingcountries.

FigureO10:CITefficiency–ComparisonofOurDatawith IMF(2014)

Our dataIMF (2014)

Notes: Thisfigurecomparesthevaluesofcorporateincometax(CIT)efficiencybetweenthe seriesestimatedusingourdata(lightbluecircleline)andtheseriesestimatedin IMF(2014) (darkbluetriangleline).Werestrictourdatatothe’Non-OECD’sampleofdevelopingcountries usedintheIMFstudy,withtheexceptionthatMaltaisincludedintheIMFstudybutdoesnot existinourdata.Thereported IMF(2014) seriesisapproximate,asthenumbershavebeen extractedfromAppendixFigure1ofthestudybasedonvisualinspection.CITefficiencyis definedastheratioofCITrevenuescollecteddividedbytheproductofcorporations’operating surplusandtheCITrate.Formoredetails,seeSectionO.4.

EffectiveTaxRatesDatabase:CaseStudiesReport

PierreBachas∗ ,MatthewFisher-Post† ,AndersJensen‡ , XabierMoriana-Armendariz§ ,GabrielZucman¶

January2024

Abstract

Thisreportpresentsdetailedcountry-by-countryguidanceonthecreationoftimeseriesdatafrom1965 to2020ontaxrevenues,factorincomesharesandeffectivetaxratesforthecountriesshownintheAtlasof theOffshoreWorld(link).Originallybasedonthepaper Bachas,Fisher-Post,Jensen,andZucman (2022), theguidelinedetailsthedatasourcesofhistoricaltaxrevenuedataandexplainsthechoicesandadjustments made.Beyondthewell-knowninstitutionaldatasetsongovernmenttaxrevenue(OECD,ICTD,IMF),we havedigitizedandharmonizedthousandsofarchivalpublicfinancedocumentsfromdevelopingcountries,in ordertoconstructthelong-runtimeseries.Inthefollowingpages,wediscussthesesources,aswellasall relevantmethodologicalconsiderationsandacademicsourcestohelpproducereliabletimeseriesestimates foreachcountry.Indoingso,weprovideatransparentresourceontherationaleforourdatainput,while welcomingsuggestionsforfurtherimprovementandexpansionofthedatabase.

• MethodologyandHowtoReadthisDocument: clickhere

• CountryList: clickhere

Thisdocumentisworkinprogress.Atthemoment,wecovercountrieswithmorethan 15millioninhabitantsandsomeadditionalcountries(67intotal).Thesampleofcountriesis currentlybeingexpanded.

∗ ESSEC-BusinessSchoolandWorldBankResearch,pbachas@worldbank.org

† ParisSchoolofEconomics,mfp@psemail.eu

‡ HarvardKennedySchoolandNBER,anders jensen@hks.harvard.edu

§ ParisSchoolofEconomics,xabier.moriana@psemail.eu

¶ ParisSchoolofEconomics,UCBerkeleyandNBER,zucman@berkeley.edu

CountryList

Pleasefollowthe link toseethelistofcountriesincludedinthisdocument.Weemphasizethatthisisawork inprogress.Atthemoment,wecover67largestcountries(>15millioninhabitants)1 .Ourteamiscurrently workingtocompletethecasestudiesfortheremainingcountriesinthefullsample.

(i)Introductorynote

Thepresentpaperprovidesacountry-by-countryguidelineontheconstructionoftheeffectivetaxrateson capitalandlaborincomes.Inaddition,itoffersinformationontheeffectivetaxratesoncorporateprofits,and ondis-aggregatedtaxrevenueasashareofnationaldomesticproduct.

Sincenationalaccountingstatisticsarecompiledfollowinginternationallystandardconceptsandmethods, effectivetaxrates(ETRs)areconceptuallycomparableovertimeandacrosscountries.Theseseriesprovidea pictureoftaxburdensoncapitalandlaborinthesecountries.Byconsideringthetaxrevenuesactuallycollected (ratherthanstatutoryrates),ETRsshowthenetpasteffectsofalltaxrules—basereductions,exemptions,tax credits—andoftaxavoidanceandtaxevasion.Loweffectivetaxratescanresultfromtaxavoidanceortax evasionpractices,butmayalsoresultfrompolicychoices.

(ii)Themethodologyinbrief

Theeffectivetaxrateonlabor(ETRL)isthetotalamountoftaxesactuallycollectedonlaborincome,divided bytotallaborincomeintheeconomy;similarly,theeffectivetaxrateforcapital(ETRK )isthetotalamount oftaxesactuallycollectedoncapitalincome,dividedbytotalcapitalincomeintheeconomy.Taxesandfactor incomesarerespectivelyallocatedtothenumeratoranddenominatorasfollows:

TaxRevenueAllocation:

• Corporateincometaxes,wealthtaxes,andpropertytaxesareallocatedtocapital.

• Payrolltaxesandsocialsecuritypaymentsareallocatedtolabor.

• Personalincometaxesareallocatedpartlytolaborandpartlytocapital(see Bachasetal. (2022)for details).

FactorIncomeAllocation

• Laborincomeequalscompensationofemployeesplusashareofmixedincome(operatingsurplusofprivate unincorporatedenterprises)–see Bachasetal. (2022)fordetails2

• Capitalincomeequalstheremainingshareofmixedincome,pluscorporateprofits(i.e.,operatingsurplus), plusrentalincome(i.e.,operatingsurplusofhouseholds).

1 Myanmar(54millioninhabitants)andVenezuela(28millioninhabitants)arenotincludedatthemomentduetothelackof qualitydataforthehistoricalperiod.

2 Notethatfactorincomes(bothcapitalandlabor)arebasedonadis-aggregationofthenetdomesticproduct(NDP).TheNDP subtractstheconsumptionoffixedcapital(capitaldepreciation)fromgrossdomesticproduct(GDP).NDPisthuslowerthanGDP by10%onaverage.

1. TaxRevenue: whatshareofpersonalincometax(PIT)revenuesshouldbeallocatedtocapitalversus labor.Startingfromabaselinewhere15%ofPITrevenuesderivefromcapital(consistentwithUS measuresinPikettyetal.,2018),twoadjustmentsatthecountry-yearlevelareperformed.Theproportion ofcapitalrevenueswithinPITisincreasedincountrieswithahighPITexemptionthresholdintheincome distributionandtheproportionisloweredincountrieswheredividendsfacelowertaxratesthanwages. Wereporttherangeofvaluesforthecapitalshareineachcountry.Inthecompanionpaper(Bachaset al., 2022),twoboundingscenariosareconstructed.

2. Factorincome: whatshareofmixedincome(unincorporatedenterprises)shouldbeallocatedtocapital versuslaborincome.Forthiscase-study,a75%laborvs.25%capitalsplitisassumed.Inthecompanion paper(Bachasetal., 2022),twoboundingscenariosareconstructed. WerefertothepaperandtotheMethodologyNoteavailableinthewebsiteforfurthermethodologicalissues.

(iii)Thedatabaseinbrief

TaxRevenue: Thetaxrevenuedatadis-aggregatesrevenuesbytype,followingthe OECD RevenueStatistics classificationoftaxes.Werelyonthreesources:

1. Whenavailable, OECD RevenueStatisticsdataisthepreferredsource,asitcoversalltypesoftaxrevenues andgoesbackto1965forOECDcountries.

2. DatafromICTDisadded,whichincludesmostdevelopingcountries,andwithcoveragethatstartsinthe 1980s.

3. Tocomplementthesesources,theteamconductedanarchivaldatacollection.Withintheconceptof ‘HistoricalArchive’,weincludedatafrom:

• LamontLibraryatHarvardUniversity(Historicalpublicbudgetsandnationalstatisticalyearbooks)(websitelink).

• OfflineIMFGovernmentFinanceStatistics(1972-1989)(websitelink).

• AnnualReportsfromthecountry’sMinistryofFinance/NationalCentralBankforrecentyears.

Factorincome: Thefactorincomedatasetisbasedontheconstructionofapanelofnationalaccounts.It comesfromtwosources:

1. TheSNA2008-frameworkonlinerepository,whichhasglobalcoverageinrecentdecades.

2. TheSNA1968-frameworkofflinerepository,whichcovershistoricalobservationsfromthe1960sand1970s formostcountries.

3. Ifthereisnodataforasub-componentoffactorincomes,we:1)recoveritsvaluefromtheotherSNA datasetandusingnationalaccountingidentities;or,ifnotpossible,2)imputevaluesforthecomponent followingtheprocedurefrom Blanchet,Chancel,Flores,andMorgan (2021).

Thefinalsamplecontains7070country-yearobservationsin154countries,overtheperiod1965-2020.Note thatthecompanionpaper(Bachasetal., 2022)consideredthe1965-2018rangeofyears.Thenumberof countriesstartsat75in1965andgrowsto105by1975(duetoindependenceorcountrycreation).Thekey jumpincoverage—from116to146countries—occursin1994andcorrespondstotheentryofex-communist3 countries,includingChinawhenitmodernizeditspublicfinances(seeNotesonpage 6).

Figure1showsgraphicallyhowthedatasetiseffectivelycomposedoftwoquasi-balancedpanels:thefirst covers1965-1993andexcludescommunistregimes,accountingfor85-90%ofworldGDP;thesecondcovers19942020andincludesformercommunistcountries,accountingfor98%ofworldGDP.Mostoftheex-communist countriesarelow-middleincomecountries,makingthejumpbiggerforthissubgroup.Thesmalldropin20192020,comingfromlowandmiddle-incomecountries,isexplainedbythelackofrecentdataforVenezuela,Syria andYemen.

3 Weuseex-communisttorefertobasicallyformersovietcountries,ChinaandVietnam.Wedonotincludeinthisgroup othercommunist/socialistregimesinotherpartsoftheworld,suchastheAfricansocialistcountriesincertainperiods(Ethiopia, MozambiqueorAngola).

Figure1.DataCoverage

1Afghanistan

Sources

Source Firstyear Lastyear Interpolation

ICTD 2003 2020

Timeseries WestartthedataseriesforAfghanistanin2003.Wedohavedataforprioryears: historicalarchivedatafor1973-1978andICTDfor1982-1989.However,weexcludethisperiodbecause thesefiguresareeithertooshortintime(historicalarchive)ortheyarenotdisaggregatedwhilebeing quitevolatile(ICTD).

Harmonization

ThemainadjustmentsforAfghanistanaremadeonincometaxation,socialcontributionsandproperty taxation.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

• SplitCIT/PITwithquestionablevaluesfor2006-2010andnotavailable after2017.Useinformationinadditionaldocuments,andinterpolation ofproportionalratiosfor2006-2010using2005and2011asreferences andextrapolationofproportionalratiosafter2017

• Smallunallocableincometaxrevenueduringthewholeperiod

• CapitalshareofPIT:mean=30%;constant

Minusculebutnon-zerovaluesduringthewholeperiod.Extrapolationof valuesafter2017

Minusculebutnon-zerovaluesduringthewholeperiod.Extrapolationof valuesafter2017

DecentralizedRevenues Notdetermined

Notes

2Algeria Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 2020 1967,1970-71,1974

Timeseries Weusearchivaldatafrom1965through2020.Years1967,1970-1971and1974areinterpolated.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemajoradjustmentsforAlgeriaareonincometaxationandsocialcontributions.

Category Adjustment

• SplitCIT/PITavailableallthewaybackto1965

IncomeTaxation

SocialContributions

• AllunallocableincometaxrevenueisconsideredasPIT,basedoninformationinadditionaldocuments.

• CapitalshareofPIT:mean=20%; ↓ trend(25%to18%)

Minusculebutnon-zeroduringthewholeperiod.Werelyonexternalsources (RPC data)

PropertyTaxation Notincluded

DecentralizedRevenues Notdetermined

Notes

• OurarchivaldatadiffersfromIMFhistoricaldata.However,thisdifferenceiscompletelydrivenby theconsiderationofthetax“Taxessurlechiffred’affaires ”.TheIMFconsidersitasanindirect tax,whereasweincludeitasacorporateincometaxinourhistoricalarchivedata,basedon additionalpolicyreports.

3Argentina Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1989 OECD 1990 2020

Timeseries Weusearchivalsourcesfrom1965until1989,referringtoOECDfortheperiodsincethen.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemajoradjustmentsforArgentinaareonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

• SplitCIT/PITnotavailablefor1961-69and1974-1989.Interpolationof proportionalratiosusingpriorandlateryearsforwhichwehavedisaggregateddata,aswellasinformationfromadditionalpolicydocuments.

• Smallunallocableincometaxrevenue(<0.4%)inOECDdata(19902020)

• CapitalshareofPIT:mean=18%; ↓ trend(20%to15%)

WerelyonICTDforsocialcontributionsfor1985-1989,asitmatcheswith OECDin1990-2016(andourhistoricalarchive(Alvaredo, 2010)clearlyunderestimatessocialcontributionsinthisperiod).Priorto1985wetrusthistorical archivedataasitmatchesforoverlappingyears(1980s)withICTD

PropertyTaxation Included

DecentralizedRevenues

Notes

Notdeterminedforhistoricalarchivedata.Excludedlocalgovernmenttax revenuesbutincludedprovincialrevenuesforOECDdata

4Bangladesh

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1976 2000 1980-81

ICTD 2001 2020

Timeseries

Ourdatastartsin1976.Theseriesfollowshistoricalarchivedatafrom1976through 2000,thenusesICTDdatafrom2001through2020.Weinterpolateyears1980and1981.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforBangladeshareonincometaxationandonsocialcontributions.

Category Adjustment

• SplitCIT/PITnotavailablein2017-2020.Extrapolationofproportional ratiosfrom2016

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• Unallocabletaxinhistoricaldatapriorto2001.Partofit(fromnoncorporateincometax)includedinPIT,basedonadditionalinformation inpolicydocuments.

• CapitalshareofPIT:mean=30%;constantpre-2010(30%), ↓ trend post-2010(30%to26%)

Minusculebutnon-zerolevels.Useof RPC dataforthewholeperiod,extrapolatingyears2014-2020.SSA(2017)indicatesthatthesocialsecuritypolicy beganin1971

Minusculebutnon-zeropropertytaxrevenueinarchivaldata(1965-2001) whilenotpresentinICTD(2001-2020).Nowealthtaxbutrealestatetaxes. Althoughwedonothavedataforpropertytaxrevenueafter2001,weexpect ittobeverysmall

Ourestimatesaremostlikelycentralgovernmentonly,asthereisnomentionof province-levelrevenues.However,externalsources’estimatesofthetax/GDP ratioalsoseemtoexcludedecentralizedrevenues

• Earlyliteratureshowssimilarvalues(Ghafur&Chowdhury, 1988)withthelikeliestsourceof variationbeingthedifferenceintheGDPdenominator.

• Themajorreformandpolicylandmarkswerein1984(anincometaxordinanceundermilitaryrule), 1991(institutingtheVAT)andmorerecentlyin2009(toreformtheVAT).However,tax/GDP ratiohasremainedinverylowvaluesuntilnowadays.

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1989 1968-1975(partial)

IDB-CIAT 1990 2020

Timeseries WeuseIDB-CIATdatafordetaileddataonthetaxstructurefrom1990-2018,andrefer tohistoricalarchivedatafortheyearsprior.Foryears2019and2020,weuseinformationfromthejoint publicationbytheOECDandIDB-CIAT,availableat OECD website.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforBrazilareonincometaxation,onsocialcontributionsandonproperty taxation.

Category Adjustment

• Interpolationofincometaxrevenuebetween1968and1975

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

• ExtrapolationofthePITvs.CITsplitbacktothe1960s,from1976

• Incometaxesonnon-residentsconsideredasacorporateincometax

• Unallocableincometaxrevenue2019-2020.ExtrapolationofproportionalratiosofthesplitofCIT/PITfrom2018

• CapitalshareofPIT:mean=25%; ↓ trend(30%to22%)

Nodatapriorto1980.Weuse RPC data(RealPoliticalCapacitydatabase, alias‘RPC’)forsocialsecuritypre-1980,‘backcasted’byitsratioin1990with IDB-CIAT

• ThereisnonetwealthtaxonindividualsinBrazil,butthereisamunicipalrealestatetaxandafederaltaxonruralland

• Financialtransactionstax(IOF):consideredhereaspropertytax whereasinoriginalsource(Afonso,Araujo,andVianna (2004),usedfor 1980-1989)wasconsideredanindirecttax.Interpolationofthestructure ofthistaxholdingconstantits1980valuebackto1965andaddingitto theotherpropertytaxes(observedin Chelliah (1971))whilesubtracting itfromtheindirecttaxbill

IDB-CIATaccountsforbothcentralgovernmentrevenueanddecentralized localrevenues.Onthecontrary,thehistoricalarchivedataonlyrefersto thecentralgovernment.However,incometaxisonlyassessedatthecentral governmentlevel,sowecanatleastusethehistoricalarchivematerialforthis purpose

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1994 2007

OECD 2007 2020

Timeseries Inkeepingwithourruletonotincludecommunistcountriespriortotheirtransition,we donotincludeChinabeforeitsfirstyearofmoderntaxsystem,1994(seenotebelow).Foryearsprior to2007,ourChinesegovernmenttimeseriescomesprimarilyfromhistoricalarchivedataonline.We haveuseddigitizedstatisticsfromChina’sStatisticalYearbook(also online)andphysicalcopiesofthe CompendiumofStatisticsfromHarvardarchives,aswellaslong-runpublicfinancedataavailableonline fromtheNationalBureauofStatistics(see link).After2007weuseOECDdata.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforChinaareonsocialcontributionsbefore2019.

Category Adjustment

• SplitCIT/PITallthewaybackto1994

IncomeTaxation

• CapitalshareofPIT:mean=21%; ↓ trend(27%to15%)

SocialContributions OECDdataisnotavailablebefore2019.Weusehistoricalarchivedatathat coversuntil2018

PropertyTaxation Included

DecentralizedRevenues China’sfiscalpolicyhasbeenalwaysundertheoverallauthorityandobservationofthecentralgovernment.Whileitwouldbepossibletoexamine anddisaggregatefurtherthepatternsoftaxonadecentralized(province-byprovince)level,thereislittledoubtthatourestimatesarecapturingallpublic revenues

Notes

• ChineseModernTaxSystem: Inourbenchmarksetting,weonlyincludeformerlycommunist economiesintoourdatastartingin1994.GivenChina’sweightintheglobaleconomy,itisworth reviewingthereasonforthatchoice.ThetaxrevenuedataforChinacoversmostofoursample periodalthoughitsqualityimprovesmarkedlyinthe1980s.

Priortothe1980s,Chinahadacommandeconomymodelof‘profitdelivery,’inwhichthestate directlyreceivedtherevenuesofprofitableSOEs,andsubsidizedunprofitableones.Acorporate incometaxfirstappearsinChinain1983-84,butthemajorityofthebasecontinuestobestateownedenterprises.In1985,thetaxsystemwasfurtherreformedintoa‘fiscalcontracting’system wherebyfirmsnegotiatedafixedlump-sumpayment(regardlessofeconomicoutcomes),which cannotbesplitintolaborversuscapitaltaxes(norintoconsumptiontaxes).Wethereforeexclude the‘pseudo’-CITrevenuedatingfrom1985through1993.

Rather,weconsiderthatChina’smoderntaxsystembeganin1994. LouandWang (2008)shows that,in1994,Chinaestablishedforthefirsttimeacentraltaxadministration;reformedthe‘fiscal contracting’system;unifiedthePIT;createdaVAT;andreduced‘extrabudgetary’(non-tax) revenues.Thusfrom1994onwardwecancategorizetaxrevenuepreciselybytype,assignthemto capitalorlabor,andestimateourETR.

• PriorLiteratureonChina: Itisworthhighlightingtwoimportant,externalsourcesofrevenue estimates:theICTDandthoseofUCSDprofessorBarry Naughton (2007).ICTDpatternsagree withoursonbroadordersofmagnitude,fortheyearsinwhichICTDrevenuedataforChinais available,butthesedodifferslightlyintheirclassificationsoftaxrevenues.4

Naughton,inturn,citedstatisticsfromanOECDstudy(Bouin,Coricelli,&Lemoine, 1998).He estimatestotalrevenuein1978(notincludedhereduetothereasonabove)at34percentofGDP,of which22percentagepointswereprofitsandtaxesfromstate-ownedenterprisesand11fromgeneral salestaxes.Ourdifferentglossonthebreakdownofpublicrevenuesatthattimeisactuallyfromtwo causes:(i)oursisahigherestimateofGDP(verifiedfromtheWorldBankandtheWorldInequality Database);and(ii)adifferenttreatmentofstate-ownedenterprises’corporate‘profits.’Therefore wedonottreatasentirely tax revenue,andweapplythegovernment’sownnomenclatureofrevenue categoriestodescribetaxrevenueasroughly40percentofoverallbudgetaryrevenues(andeven lesswhenoneincludesextrabudgetaryrevenues).Ourtotal(budgetary)revenuenumbers,inraw levels,arealwayswithin10percentoftheOECDestimatesfrom1978-94.By1994thediscrepancy intheirtreatmentofpublicrevenuedisappears; Bouinetal. (1998)’sestimateoftax(andtotal budgetary)revenuedropsbelow15percentofGDP—inaccordancewithourownestimates.

4 ItseemslikelythatICTDhasclassifiedthe‘unifiedbusinesstax’asaindirecttaxseriesrevenue(specifically,atypeof consumptiontax),whilewehaveinsteadcategorizedthisasacorporateincometax.Also,ICTDdoesincludesomepersonalincome taxrevenueinthelate1990s,morethan1percentofGDP.ItisunclearfromwherethisnumberisretrievedfortheArticleIV report,asourdatafromthenationalstatisticalbureaulistsminusculeamountsuntilafterthe1999reform.

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1989 OECD 1990 2020

Timeseries WeuseOECDdatafortheperiodsince1990,butrefertoarchivesourcesforthehistorical periodfrom1965.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforColombiaareonincometaxation.

Category Adjustment

IncomeTaxation

• SplitCIT/PITnotavailablebefore1990.Extrapolatethesplitin1990 (firstOECDyear)backthroughthehistoricalperiod,whileusingthe totalincomerevenuelevelsofthehistoricaldata,andbasedonadditional informationinpolicydocuments.

• Unallocableincometaxrevenueafter1990.Weincludeallofitincorporateincometaxrevenuefollowingtheevidenceshowninthe W.Bank (2014)

• CapitalshareofPIT:mean=14%; ↓ trend(15%to12%)

SocialContributions Included

PropertyTaxation Marginalimportancebeforeyear2000,showninbothdatasources DecentralizedRevenues Highlevelofcertaintythatthedataincludesbothcentralandlocalgovernment revenues

Notes

• Forthehistoricaldataperiod,ourestimationmatchespreviousliterature.Weshowasimilarraise intaxrevenueforthe1970sas Garc´ıa-Garc´ıaandGuterman-Bromberg (1988).Forthe1980s, ourestimationsarebelow McLureJr (1992)andabove Junguito,Rinc´on,etal. (2004).This discrepancyisexplainedbydifferentconsiderationsofsocialsecurityandindirecttaxes,supporting theideathatdecentralizedtaxationiseitheralreadyincludedimplicitly,ornotsignificantpriorto 1980.

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive

Timeseries

Weusehistoricalarchivedatafrom1968to1990,thenICTDdatafrom1991to2018. WerefertoICTDfortheoverallleveloftax/GDPinthe1980sbutrefertoarchivedataforitsdisaggregation(‘within’componentsharesrelativetothattotal).ICTDdataimprovesinqualityonlyafter 1996(whentheyrefertoIMFArticleIVreports),soweinterpolaterelativesharesoftaxes(withinthe overalltax/GDPlevel)fortheyears1992-95.Wealsointerpolateyear1973.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsfortheDemocraticRepublicoftheCongoareonincometaxation.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

• SplitCIT/PITnotavailableforyears1981and1982.Interpolationof theproportionsofPITvs.CITwithinoverallincometaxrevenueusing 1980and1983asreference

• Unallocableincometaxin1977-1990,andespeciallyrelevantduringthe firstpart(1977-1982).Itincludesadirecttaxcategorycalled’divers’ thatwedecidenottoallocateexclusivelytoCITorPIT,butinstead assignsharesbasedonadditionalpolicydocuments.

• CapitalshareofPIT:mean=24%; ↑ pre-2000(19%to30%)and ↓ post-2000(30%to26%)

MinusculevalueinICTD,missinginhistoricalarchive.Theverylowvalues inICTDindicatesthatitsabsenceinourarchivaldatadoesnotrepresenta significantgapintheTimeseries

Dataavailableonlyfor2010-2020.AccordingtoIBFD,thereisnowealthtax inDRC,butthereisapropertytax(forallbutagriculturalornon-profituses). However,itsvalueaccordingtoICTDisminusculeforrecentyears.Without havingthedatatoconfirmthat,weexpectthatpropertytaxdonotplaya significantrolefortotalrevenuecollectioninhistoricalperiods

DecentralizedRevenues Notdetermined

Notes

• Theearly1990sdropinallrevenuecategoriesisgenuine,asthiswasaperiodofhyper-inflation. Themassivedeclineof(unindexed)taxrevenuecollectionduringhyperinflationisknownasthe Tanzi-Oliveraeffect.Thisisthecommonexplanationforthe1990sfortheDRCsuggestedinprior literature(DeHerdt, 2002; Nachega, 2005).

• Thevolatilityofbothdirectandindirecttaxation(andwithinproportionsofeach)arelikely genuine,asDRCwasaresource-dependenteconomyandsubjecttoshocksintheworldpriceof copper(cf. DeHerdt (2002)).

Source

Source

Firstyear Lastyear Interpolation

Historicalarchive 1965 1989 1965-67,1970-71,1973-74

ICTD 1990 2001

OECD 2002 2020

Timeseries

Weusearchivaldatafortheperiod1965-89(includingIMFhistoricaldata1975-89),then ICTDfrom1990until2001,withOECDdatafrom2002until2020.Weinterpolateyears1965-67, 1970-71and1973-74.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforEgyptareonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablefor1998.Interpolationofproportionalratiosusing1997and1999

• UnallocableincometaxforOECD(2002-2008).Itisentirelyduetoa taxcalled‘TaxonmovablecapitalrevenuesfromC.B.E’[CentralBank ofEgypt]whichweallocatetocapitalbasedonadditionalpolicydocuments.

• CapitalshareofPIT:mean=20%; ↓ (25%to15%)

RPC databaseforsocialsecurityrevenuesintheperiods1960-1974and19902001,whenOECDdatabegins.Fortheperiod1975-89werelyonIMFhistoricaldata(historicalarchive)

Availableinthethreesources.Thereisbotharealestatetaxandanagriculturallandtax

WedonotobserveanydecentralizedrevenuesintheOECDdata,norinour archival(norhistoricalIMF)norICTDsource

• Intheoverlapperiods(1987-89and2001-2002)theseriesmatchalmostperfectlyacrosssources. Inaddition,ourseriesmatchthe WorldBank onlinedatabaseforrecentdecades(after1975)as wellastheymatchpriorliteratureforthelate1960sand1970s(Nyrop, 1976; Smith, 1970).

• Thesharpdropintaxrevenuesinthe1980safterthepreviousincreaseinthelate1970sisgenuine, perIMFhistoricaldata.

Source

Source Firstyear Lastyear Interpolation

Historicalarchive

Timeseries Weusehistoricalarchivedatafrom1965through1992,thenturntoICTD(basedon IMFArticleIV)for1993to2019andwerelyagainonhistoricalarchive(basedonEthiopianCentral Bank’sAnnualreport)forthelastyear2020.Weinterpolateyears1989and2005.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforEthiopiaareonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablepriorto1975andbetween2008and2019. Extrapolationofproportionalratiosbackfrom1975andinterpolation between2008and2019using2007and2020asareference,andcorroboratebasedonadditionalpolicydocuments.

• Smallunallocableincometaxrevenue(≈ 1%oftotalrevenue)after2001

• CapitalshareofPIT:mean=30%;constant

RPC databaseforthewholeperiod,extrapolatedafter2014.Minusculebut non-zerovalues.AccordingtoSSA(2017),therehasbeenalawinplacesince 1963.Thus,thelittledatasuggestswearenotmissingamajorcomponentof government’staxcollection

AvailableforbothhistoricalarchiveandICTD.PerIBFD,thereisnowealth taxinEthiopia,norarealestatetaxatthefederallevel.Thefactthatwe observepropertytaxrevenue(thelandusefee)seemstoindicatethatweare observingstateandlocaltaxes

Evidencesupportingtheinclusionofstateandlocaltaxes(seePropertytaxation,above)

• Weshowaverygoodmatchonoveralllevelsforthewholeperiodcomparedwith Mascagni (2016).

• 1974markedacoup,aftertheworldoilcrisis,andbeginningasocialisterawhichlastedthrough 1991(notconsideredex-communist,seenoteinPreface, iii).Wedonotobserveanymarked differenceinourdatain1974,butthe1991-92transitioncorrespondstoaconsiderabledeclinein taxrevenuefrombusinesses(corporateincometax),althoughitsoonrecovered

Source Firstyear Lastyear Interpolation OECD 1965 2020

Timeseries WeuseOECDdatafrom1965to2020.

Harmonization

DatafromOECDonFrancepresentdetailedinformationonallthetaxcategoriesshownbelow.Notwithstanding,theconsiderablyhighvaluesofthecapitalETRarecurrentlyunderrevision.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• CapitalshareofPIT:mean=13%;stabletrend(14%to12%)

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues Included

Notes

12Germany

Sources

Source Firstyear Lastyear Interpolation

OECD 1965 2020

Timeseries WeuseOECDdatafrom1965topresent.Thedatapriorto1990isonlyforWest Germany.

Harmonization

DatafromOECDonGermanypresentdetailedinformationonallthetaxcategoriesshownbelow.There arenotmajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• CapitalshareofPIT:mean=12%;stabletrend

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues

Notes

Localtaxesarepresentfrom1973,representingaround9%oftotaltaxrevenue ineveryyear.Inmostcasesmorethan70%ofthesearefromlocalincome taxes,withtheremainderfrompropertyandseveraltypesofsalestaxes

Sources Source Firstyear Lastyear Interpolation

Historicalarchive 1965 2020

Timeseries

OurprimarysourceforIndiangovernmentrevenuestatisticsishistoricalarchivedata. Wecollectdatafromtwoofficialdatasources:priorto2018werelyonIndiastat(websitelink)andfor 2019-2020ontheReserveBankofIndia(websitelink).

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforIndiaareonincometaxation.

Category Adjustment

• SplitCIT/PITnotavailableafter1991.

IncomeTaxation

PropertyTaxation

DecentralizedRevenues

–

Twomainincometaxeslistedinitspublicfinanceaccounting:the ‘corporationtax’andthe‘incometaxotherthancorporationtax.’ Thelatterisnotjustincometaxesonindividuals.However,prior to1991,publicfinancialrecordsweredisaggregatedwithinthis category.Foryearsafter1991,weextrapolatetheproportionof CIT/PITintherevenuecollectedfrom‘incometaxotherthancorporationtax’observedinyearspriorto1991,andcorroboratewith additionalinformationfrompolicydocuments. –

For2019and2020weonlyhaveinformationonCIT/PITsplitfor centralrevenues.Wecomputethe“ratioofratios”for2018:the ratiooftheCIT/PITsplitforcentralrevenuesovertheCIT/PIT splitfortotalrevenues(central+stateandlocal).Assumingaparalleltrendfrom2018to2020,weextrapolatethis“ratioofratios” foryears2019and2020

• CapitalshareofPIT:mean=28%; ↓ trend(30%to22%)

ThedatasourcesuseddonotobservedataonsocialcontributionsforIndia. However,accordingtothe SSA(2018),Indiahashadasocialsecuritypolicy inplacesince1952,withawide-rangingsetofcontributionstopublicsocial insurancescheme.Nevertheless,thisrevenuecategoryisunobservedinofficial governmentaswellasUNdata,andlistedaszeroinICTD-IMFdatauntila verysmallamountfrom1998onward(lessthan0.05%ofGDP).Wesuspect itislikelyincludedwithintheincometaxcategory

Includedbutverysmallpriorto2018.Notincludedin2019-2020

Ourdatasetincludescomprehensivelyallsourcesoftaxandnon-taxrevenuefromcentralandstategovernmentspriorto2019.SeeIncomeTaxation (above)fortheadjustmentfor2019-2020

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1996 1968-1971,1994

OECD 1997 2020

Timeseries

Ourmaindatasourceishistoricalarchivedata,through1996,beforeOECDdatabegins in1997.Weinterpolateyears1968-71and1994.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforIndonesiaareonincometaxation.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablefrom1985to2001(allunallocabletaxes). Interpolationofproportionalratiosusinginformationfromyearsprior to1985andlaterto2001,andcorroboratedwithadditionalinformation inpolicydocuments

• CapitalshareofPIT:mean=29%; ↓ trend(30%to24%)

WedonotobservesocialcontributionsinIndonesia(nordid Amir,AsafuAdjaye,andDucpham (2013)).Accordingto SSA(2017),thefirstsocialsecuritylawwasimplementedin1977.However,thiswasaverysmallproportion ofgovernmentrevenue,astheOECDdatadoesnotbegintoincludeanysocial securityrevenueuntil2015,anditislessthan0.1%ofNDP

Propertytaxationisminusculeaccordingtothereporteddata

Withoutexplicitmentiononit,ourdatasourceseemstobefederal.Either localtaxeswereunimportantortheywerenotaccountedfor.However,OECD datadoesnotincludethemuntil2000,andtheydonotmakeupmorethan 1%ofthetotalrevenueuntil2013

• ItisworthhighlightinghownaturalresourcerevenueshavebeenimportantandsignificantinIndonesia. Gillis (1985)estimatedthatoilandgastaxrevenuesrosefrom1.2%in1968to16.0% ofGDPby1981,while Ribeiro,Villafuerte,Baunsgaard,andRichmond (2012)estimatecurrent (public)resourcerevenueat4.5%ofGDP.Resourcerevenueexplainsmostofthedifferencesobservedbetweenourestimationsandpriorliterature(suchas Gillis (1985)and Prasetyo (2018)). Forourpurpose,weattempttostitchtogetheraseriesonthestrictlytaxrevenueswithIndonesia’s publicfinance(agreeingalsowithestimationsfrom Amiretal. (2013)).

• TheVATwasintroducedin1984(replacingsalestaxandturnovertax).Afterthat,recentreforms havelargelybeenaimedatincreasingrevenueandcomplianceasIndonesiawasseenasalow-taxeffortcountry.

Source Firstyear Lastyear Interpolation OECD 1965 2020

Timeseries WeuseOECDdatafrom1965topresent.

Harmonization

DatafromOECDonItalypresentdetailedinformationonallthetaxcategoriesshownbelow.There arenotmajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• Unallocableincometaxinsomeyearsfrom1980to2020

• CapitalshareofPIT:mean=17%; ↓ trend(27%to12%)

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues

Notes

Localgovernmentrevenueispresentinthedatasince1973,butrepresentsan increasing(andmorethan3%)shareoftotaltaxrevenueonlysincethemid1990s,andhasgrownto15%ofoveralltaxrevenue.Theincreaseislargely duetothepresenceoflocalsalestaxes,althoughthereisalsoamiscellaneous localbusinesstax

Sources

Source Firstyear Lastyear Interpolation

OECD 1965 2020

Timeseries WeuseOECDdatafrom1965topresent.

Harmonization

DatafromOECDonJapanpresentdetailedinformationonallthetaxcategoriesshownbelow.There arenotmajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• CapitalshareofPIT:mean=11%; ↑ trendpre-2000(11%to14%)and ↓ trendpost-2000(14%to9%)

SocialContributions Included

PropertyTaxation included

DecentralizedRevenues

Notes

Localgovernmentrevenueispresentinthedatasince1973,andrepresentsa steady23-28%oftotaltaxrevenue.Incometaxesrepresentadecreasingshare oflocaltaxrevenue,butstillmorethanhalf(downfrom60%from1973-92). Propertytaxeshavegainedinimportancewhatincometaxeshavelost,up from20to30%oftotallocaltaxrevenuesincethe1970s

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 2000

OECD 2001 2020

Timeseries Weusehistoricalarchivedatafortheyears1965-2000,andthenOECDdataforthe periodfrom2001to2020.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforKenyaareonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitofCIT/PITavailablepre-1974reform(reviewedhistoricalinformationonPAYEvs.employer-surtaxregulations)andpost-2002(OECD). Interpolationofproportionalratiosforyears1973-2001,anduseadditionalinformationtoverifyinterpolatedshares.

• Unallocableincometaxafter2001.From2001to2014allocatedtotallytoPIT(withholdingtax),whereasfrom2015to2020allocatedto CIT/PITaccordingtoOECDsheets(partwithholdingtaxtoPITand partcapitalgainstoCIT)

• CapitalshareofPIT:mean=28%; ↓ trend(30%to26%)

Reallysmallbutnon-zeroduringthewholeperiod.Werelyonexternalsources fortheperiodpriortoOECDdata(2000): RPC datapre-1996andUNfor 1996-2000.

PerIBFDthereisnotacapitaltax,butthereisalocalgovernmenttaxon landvalue.Wedonotobservethesetaxesinourarchivematerial

Weareonlyabletocollectrevenuesofthecentralgovernment,withnoinformationatthesub-nationallevel

• Ourestimationmatcheswithpriorliterature,bothinlevelsandtrends(Karingi&Wanjala, 2005; Macha,Lado,&Nyansera, 2018).Littledivergences,especiallyatincometaxationfortheearliest period(Maina, 2014)arelikelyexplainedbythevalueofthedenominator(GDP).

• Thestructureofthekenyantaxsystemhasbeenstableovertime(Wawire, 1991)withsome taxreformsexpandingproductiontaxes(salesandVAT),especiallyduringthe1980s(Karingi& Wanjala, 2005).

18Korea(Republicof)

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1971 1968-1971

OECD 1972 2020

Timeseries Weusehistoricalarchivedatafortheperiod1965-71,thenOECDfromitsdebutin1972. Weinterpolatefrom1968to1971,astherewereseveralmissingelementsintheavailablearchivaldata forthatperiod.

Linktohistoricalarchivedata: clickhere.

Harmonization

ForKorea,therearenotmajoradjustmentsspecificallyearmarkedforaparticulartaxcategory.The mainadjustmentcomesfromtheinterpolatedperiod1968-1971(seeNotes).

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

SocialContributions

• CapitalshareofPIT:mean=12%; ↓ trendpre-2000(17%to11%)and ↑ trendpost-2000(11%to14%)

Onlypresentafter1985.Accordingto SSA(2017),socialsecurityprograms didnotbeginuntil1973anddidnotincludeanationalpension(beyonda ‘welfare’pension)until1986–ahistorymatchingourOECDrevenuedata PropertyTaxation Included

DecentralizedRevenues

Notes

Decentralizedrevenueisnotincludedinthearchivaldata.However,the1967 levels(finalyearofthisdatasource)arenotfarofffromthe1972levels(first yearofOECD).Inaddition,previousliteraturealsoshowverylowlevelof localrevenue(lessthan2%ofrevenue)(Kwack&Lee, 1992).

• Thelowlevelsofrevenueinthe1960saregenuine(andnotanartifactof,e.g.,incompletedata),as thegovernment’soveralldevelopmentstrategyfavoredtheinflowofforeigncapital,implementing majortaxreformsduringthisperiod(Yoo, 2000).Onlyafterthe1967taxreformwhena‘global incometax’wasintroducedforthefirsttimeiswhentaxrevenueincreasedinKorea(ibid.).This slightincreaseinpersonalandcorporateincometaxrevenuematcheswiththeinterpolatedperiod.

Source Firstyear Lastyear Interpolation

HistoricalArchive 1965 1979

OECD 1980 2020

Timeseries WeuseOECDdatafrom1980,andrefertodatafromarchivesbefore1980.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforMexicoareonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• NoCIT/PITsplitfrom1980to2001.Interpolationofratiosusing1979 archivedataand2002OECDdataasreferences,andadjustedbasedon informationinadditionalpolicydocuments.

• CapitalshareofPIT:mean=15%, ↑ trendpre-1985(23%to35%), ↓ trend1985-2013(35%to8%)and ↑ trendpost-2013(8%to16%)

Lackofsocialcontributionsfrom1970to1979.Interpolationfrom1969until 1980(whenOECDbeggins)

Negligiblevalue.ThereisapropertytaxinMexico(”impuestopredial”)but accountsforonly0.02%ofGDP.Thisestimationofpropertytaxrevenues matches Madrigal-Delgado (2021)

StateandlocaltaxrevenuescollectedinOECD.Ourhistoricalarchivedata (1965-1979)matchesthestitchyear(1980),butwecannotcorroboratethe inclusionofalldecentralizedrevenuesbefore1980

• Thereisaconsiderableriseinindirecttaxrevenuessince1980,thesameyearthatwestitchacross datasources.However,thejumpisgenuineandnotanartifactofstitching.Thisincreaseisthe resultofthecreationoftheVATin1980,leadingtohigherindirecttaxcompliance(Burgess& Stern, 1993).

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1990

ICTD 1991 2009 2008-2009

OECD 2010 2020

Timeseries WeuseOECDdatasince2010,andhistoricalarchivedatastartingfrom1965.Weuse ICTDdatafortheyears1991through2009.Weinterpolateyears2008and2009.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforNigeriaareonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailable1987-1991.Interpolationofproportional ratiosrelyingon1986and1992andoverallincometaxrevenueobserved foreachyear,andinformationinadditionalpolicydocuments.

• Unallocableincometaxrevenuebetween1970and1986.Allocatedto CITbasedonhistoricalsources.

• CapitalshareofPIT:mean=27%; ↓ pre-1980(30%to26%), ↑ 1980-1985 (26%to30%)and ↓ post-1985(30%to24%)

RPC databasepriorto2010andOECDdatabaselaterto2010.Minuscule butnon-zero(RPC andOECDperiods)andzero(ICTDperiod).According toSSA(2017),therehasbeenasocialsecurity(pension)lawinplacesince 1961,althoughthemostrecentversiondatesto2014.Itispossiblethatthe levelsaretoolowtoappearinICTDdataandforthegovernmenttotrackin centralizedbudgetandrevenuestatistics

ThereisnotaxonnetworthinNigeria,andwedonotobserveanyproperty taxesinanyofourdatasources

Therevenuesinourarchivaldatasourcearefederalrevenues,ofthecentral government.Per IBFD(2019),somestateschargearealestatetax,butwe findnorecordoftheirmeasurementandmagnitude.Therearenoincome taxesatthesubnationallevel

• Competingsourcesofdatadonotalwayspreciselymatchonlevels,buttheydomatchontrends.

• Ourestimatespresentdifferencesfrom EkpoandNdebbio (1996).Itmightbeduetothetreatment ofvolatile non-tax revenue,anddifficultyclassifyingpublicrevenuestreams.

• OilrevenuesarethemajorstoryinNigeria,especiallyasasourceofcapital(Ribeiroetal., 2012). Indeed,weobservethespikeincapitalincomeandrevenueduringthe1970soilpriceshocksand itssubsequentdropinthe1980scoincidentwiththecollapseinoilprices(Pinto, 1987).

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 2020

Timeseries

Amongarchivalsources,weusecentralgovernmentsourcesforfederalstatistics,with particularattentiontoparallelpublicationsforprovincialstatistics.Between2015and2020wecollect theshareoffederaltaxrevenuethatiscollectedattheprovinciallevel.Asthisrevenueisonlyavailable inaggregatedterms,weassumethattheshareofeachtaxcategoryisequalacrossthefederalrevenue andtheshareofitthatiscollectedattheprovinciallevel.Wecomplimentthatwith“pureprovincial” taxrevenue.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforPakistanareonincometaxationanddecentralizedrevenues.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITonlyavailablefor1965-1980(fromhistoricalarchive)and 1994-2004(fromICTD-IMF):i)interpolationofCIT/PITsplitratios from1980to1994andii)extrapolationofCIT/PITsplitratiosfrom 2004topresent,bothverifiedwithadditionalpolicydocuments.

• CapitalshareofPIT:mean=29%; ↓ trend(30%to26%)

Minisculebutnon-zerolevels.Accordingto SSA(2018),thefirstlawwas passedin1972,butfirstimplementedin1976,whichcorroboratesourarchival datathatbeginsin1973(alsoshownin Syeda (2015))

Taxesonassetsareminusculebutnon-zero,andlargerintheearlyperiod (especiallyatprovinciallevel).AccordingtotheIBFD,thereisatax(since 2013)on‘netmovablewealth’,a zakat wealthtaxonMuslimsandan ushr onagriculturalland.The10%propertytaxaswellasalandtaxonfarm holdingsgreaterthanfiveirrigatedacres(ortenunirrigated)areassessedat theprovincelevel

• Provincialtaxrevenuedatafor1947-2014,benchmarkingeveryfour yearsandeverytimeasignificanttypeoftaxcomesintooroutofthe long-rundataseries.Interpolationoftheinterveningyears

• For2015-2020wefollowtheprocessexplainedin‘Timeseries’

• Hasan,Kemal,andNaseem (1997)is0.2-0.3percentagepointshigherthanourestimations.

22Phillipines

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1993

OECD 1994 2020

Timeseries Weusehistoricalarchivedatafrom1965through1993,thenturntoOECDdataforthe periodsincethen.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemajoradjustmentsinPhillipinesareonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablefrom1978to1998.Interpolationofproportionalratiosusing1977and1999asreference,andcorroboratedwith additionalhistoricalsources.

• Someunallocableincometaxduringtheearly2000s

• CapitalshareofPIT:mean=25%; ↓ trend(29%to20%)

Weuseexternaldatapriorto1994(UNSNA)andrelyonOECDforthe periodsincethen

OECDdataincludesacentralgovernmentwealthtax(onstocktransactions) andamuchmoresignificantlocalgovernmentpropertytaxestimate(0.5%of GDP).Wedonothavethisestimateinourarchivaldata

Wedonothavesub-nationalrevenuesfortheperiodweusearchivaldata(pre1994).However,thesmoothevolutionacrosssourcessuggeststhatonlysmall revenuecomesfromthestateandlocallevel(lessthan5%ofthetotaltax revenueforOECDperiod)

Source Firstyear Lastyear Interpolation OECD 1994 2020

Timeseries Inkeepingwithourruletonotincludecommunistcountriespriortotheirtransition,we donotincludePolandbefore1994.WeuseOECDdatafrom1994to2020.

Harmonization

DatafromOECDonPolandpresentdetailedinformationafter1994onallthetaxcategoriesshown below.Therearenotmajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITallthewaybackto1994

IncomeTaxation

• CapitalshareofPIT:mean=11%; ↓ trendpre-2005(12%to10%)and ↑ trendpost-2005(10%to12%)

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues Included

Notes

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1994 1999 1994-97

ICTD 2000 2020

Timeseries Inkeepingwithourruletonotincludecommunistcountriespriortotheirtransition,we neitherincludeSovietRussianoranySovietstates(intheeraoftheUSSR)inourcalculations.Forthe pre-2000period,weuseestimatesfrom Ivanova,Keen,andKlemm (2005).Forthepost-2000periodwe relyonICTDdata.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforRussiaareonalltaxcategoriesforthefirstyearsobserved(1994-1998)and onpropertytaxationforthewholesample.

Category Adjustment

• SplitCIT/PITallthewaybackto1994

IncomeTaxation

• CapitalshareofPIT:mean=15%;constanttrend

SocialContributions Included

PropertyTaxation

DecentralizedRevenues

Notes

LittleinformationonpropertytaxinRussiafromoursources,asitisfrequentlylumpedwith‘othertaxes’(caseofICTD). Preobragenskayaand McGee (2003)indicatethatitdoesnotexceed2%ofGDPand Owenand Robinson (2003)indicatethatpropertytaxwasalwaysbetweenapproximately 0.5and1.5%ofGDPfrom1994-99.Forsimplicitywesetitequalto1percent, intheabsenceofbetter(andmorerecent)data

Dethier (2000)notesthatthe1990swereaperiodofgrowingfiscaldecentralization.Comparingourestimatestotheirssupportstheideathatweare includingdecentralizedrevenuesinourestimatesofRussia’spublicfinance timeseries

• TheIMFdatafor1994-2003matcheswelltheICTDdatathatbeginsin2000.

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1989

OECD 1990 2020

Timeseries Weusehistoricalarchivedatafor1965-89,thenOECDdatafortheperiodsincethen.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforSouthAfricaareonincometaxation.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITbefore1990onlyavailableatfive-yearintervals(1966, 1971,1976,1981,1986).Fortherestoftheyearsbefore1990:interpolationofthewithin-ratiosusingthefive-yearintervalsasreference.

• CapitalshareofPIT:mean=21%; ↓ trend(22%to19%)

Wedonotobservesocialcontributionsbefore2000eventhoughinprinciple thesocialsecuritypolicywasestablishedin1928(SSA2017).However,neither alternativesources(OECD,ICTD,IMF,historicalarchive)norotherprimary sources(S.A.R.Bank, 2016)includeanysocialsecurityrevenuepriorto2001

Small(especiallypre-2000)butnon-zeroduringthewholeperiod.Years19671972areinterpolated

OECDobserveszerostateandlocaltaxesuntil2002.Thepre-1990archive dataisdrawnsolelyfrom(andregarding)centralgovernmentfinancerecords. Weassumelocalandstatetaxeswerealsozerobefore1990

Source Firstyear Lastyear Interpolation OECD 1965 2020

Timeseries WeuseOECDdatafrom1965topresent.

Harmonization

DatafromOECDonSpainpresentdetailedinformationonallthetaxcategoriesshownbelow.There arenotmajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• Negligibleunallocableincometaxpriorto1994derivedfromlocaltax

• CapitalshareofPIT:mean=16%; ↓ trend(23%to12%)

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues

Notes

Localgovernmentrevenue(mainlysalesandbusinesstax)ispresentinthe datasince1973,butrepresentsanincreasing(andmorethan3%)shareof totaltaxrevenueonlysincethemid-1990s,andhasgrownto15%ofoverall taxrevenue

• ThesharpdeclineincorporateincometaxrevenuescoincideswiththebeginningoftheGreat Recession.

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1972 1980 ICTD 1981 2020

Timeseries

ThedataseriesforSudanstartsin1972.WeusedatafromtheIMFhistoricalsource from1972to1980,thenICTDdatafrom1981.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemajoradjustmentsforSudanareonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

• Totalincometaxationrevenuenotavailablefrom1981to1990.Interpolationoftheshareoftotalincometaxationovertotaltaxrevenueusing 1980and1991asreference,andconfirmedinadditionalsources.

• SplitCIT/PITnotavailablebefore1994andafter2006withsomemissingyearsbetween1994and2006.For1980-1991interpolationofproportionalratiosusing1980and1991asreference,andcorroboratedwith historicalsources.FormissingyearsinICTDperiodpre-2006,interpolationofCIT-to-total-PITratios.Forperiodpre-1994andpost-2006, extrapolationofconstantCIT-to-total-PITratios.

• AllunallocableincometaxrevenueisallocatedtoPIT,basedonadditionalpolicydocuments.

• CapitalshareofPIT:mean=29%; ↓ trendpre-2005(30%to28%)and ↑ trendpost-2005(28%to30%)

Minusculebutnon-zeroduringthewholeperiod.Werelyonexternalsources (RPC data)Assumedasconstantafter2014

Onlyavailableinhistoricalarchivedata(1970s),butnegligibleinquantity DecentralizedRevenues Notdetermined

Notes

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 2020 1972,1977,1993-95

Timeseries Weusehistoricalarchivedataforaunifiedseriesfrom1965to2020,interpolatingseveral yearsandstitchingacrosstwodatasources,wheretheseconddatasourcecameintoeffectin1996.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforTanzaniaareonincometaxation.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

• SplitCIT/PITnotavailablebefore1974.Extrapolationbackfrom1974 to1965oftheproportionalratiosof1974withthetotalincomerevenue collectedforeachyear,verifiedwithhistoricalsources.

• CapitalshareofPIT:mean=30%;constantpre-2010(30%)and ↓ trend post-2010(30%to28%)

Minusculebutnon-zerovaluesoverthewholeperiod.AccordingtoSSA,there hasbeenalawinplacesince1964,whileaplethoraofregulationsgovernthe currentfundsfromsocialcontributions(IBFD)

Minusculebutnon-zerovaluebefore1990,andmissingafter1990.According toIBFD,thereisnowealthtax,butthereisarealestatetaxsince1974. However,alternativesources(ICTD,IMF)showhowthistaxdoesnotforma largepartofICTDorIMFestimates

DecentralizedRevenues Notdetermined

Notes

• OurestimationsaresignificantlybelowpriorliteratureforTanzania(Fjeldstad, 1995; Nordetal., 2009; Osoro, 1993).However,wefindcorrespondenceinthe within-weightoftypesoftaxes,as aproportionoftotaltaxrevenue.ApotentialexplanationpointstodifferencesinGDP’svalues (checkforinstance WorldBank(2019)).Wesuspectthatscholarswereusingthesamepublic revenuenumbersasusbutasmallerGDPdenominator.Asaresult,withsamerevenuesources theywouldhavefoundahighertax-to-GDPratio.

• The1990srevenuetrendappearsgenuine(notanartifactofourdataconstruction),aftercomparing notesacrossthesesources.Itcorrespondswithaperiodofnotablereforms:anotablecivilservice reformintheearly1990s,theinstitutionoftheTanzaniaRevenueAuthority(TRA)inthemid1990s,andotherreformsinthelate1990s(includingimpositionoftheVATin1998).

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1999 1972,980,1985, 1987,1994,1998

OECD 2000 2020

Timeseries

Weusehistoricalarchivedatafortheperiodthrough1999,thenOECDdatafrom2000 to2020.OurarchivaldataforThailandislessexhaustivethanforothercountriesandfeaturesmore interpolationthaninothercountries.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemajoradjustmentsinThailandaremainlyduetothelargeinterpolationduringthewholeperiod. Inaddition,somemodificationsaremadeonsocialcontributionsandpropertytax.

Category Adjustment

• SplitCIT/PITavailablefortheyearsforwhichwehavedata

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• Verysmallunallocableincometaxduringthe1980s

• CapitalshareofPIT:mean=22%; ↓ trend(30%to15%)

Lowbutdifferentfromzeroafter1980.Weuseexternaldatapriorto2000 (UNSNAdatabase,interpolating1997-1999)andOECDfortheperiodsince then

Lowbutdifferentfromzeroduringthewholeperiod.Forperiodpriorto2000 werelyonIMFdata.Thereisnowealthtaxbutthereisalocalpropertytax. WecapturethelatterinourOECDdatabutitisnotavailableinourarchival datasource

ItislikelythattheOECDdatacontainslocalgovernmenttaxrevenues,while ourarchivaldatadoesnot.However,thesmoothevolutionacrosssources suggestsasub-nationallevelofrevenuethatissmallbyordersofmagnitude

• Ourestimationmatchespreviousliteraturebothinlevelsandtrends(Bernardi,Fumagalli,& Gandullia, 2005; Jansen&Khannabha, 2012).

Source Firstyear Lastyear Interpolation OECD 1965 2020

Timeseries WeuseOECDdatafrom1965to2020.

Harmonization

DatafromOECDonTurkeypresentdetailedinformationonallthetaxcategoriesshownbelow.There arenotmajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• Unallocableincometaxinthe1970s

• CapitalshareofPIT:mean=16%; ↓ trend(22%to11%)

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues

Notes

Localgovernmentdataispresentsince1980,andrepresentsusuallybetween near9or10%oftotaltaxrevenueperOECD,spikingat16%in1998

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1991 1984,1991

OECD 1992 2020

Timeseries Weusearchivedataforthehistoricalperiodfrom1965,thenOECDdatafrom1992. Years1984and1991areinterpolated.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemajoradjustmentsforUgandaareonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablepriorto1990forthehistoricalarchivedata. WeuseIMFhistoricaldatafor1972-1990.Weinterpolateproportional ratiospriorto1972andforyears1987and1989

• Verysmallunallocableincometaxrevenuesince1998

• CapitalshareofPIT:mean=27%; ↑ trendpre-1990(27%to30%)and ↓ trendpost-1990(30%to23%)

Wedrawon RPC dataforsocialcontributions.Thevalueisrelativelysmall, anddoesnotappearinOECDdata.Weextrapolatefortheperiodfrom2014 topresentas RPC dataforsocialcontributionsismissingfortheseyears

Notincluded.Therearenonetwealth/worthtaxesinUganda.Property taxesareadministeredbythelocalauthoritiesannually.Theyarebasedon thevalueofthepropertyasassessedbythelocalauthorities

Notdetermined.Possiblynotincluded(atleastthepartderivedfromproperty taxes)

• ThematchbetweenarchivedatasourcesandOECDdataisveryclose.

Source Firstyear Lastyear Interpolation OECD 1965 2020

Timeseries WeuseOECDdatafrom1965to2020.

Harmonization

DatafromOECDonUnitedKingdompresentdetailedinformationonallthetaxcategoriesshown below.Therearenotmajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• CapitalshareofPIT:mean=14%; ↓ trendpre-1990(16%to11%)and ↑ trendpost-1990(11%to14%)

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues Included

Notes

Sources

Source Firstyear Lastyear Interpolation OECD 1965 2020

Timeseries WeuseOECDdatafrom1965to2020.

Harmonization

DatafromOECDonUnitedStatespresentdetailedinformationonallthetaxcategoriesshownbelow. Therearenomajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• CapitalshareofPIT:mean=16%; ↓ trend(22%to12%)

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues Included

Notes

Source Firstyear Lastyear Interpolation

IMF 1994 2002

OECD 2003 2020

Timeseries Inkeepingwithourruletonotincludecommunistcountriespriortotheirtransition,we donotincludeVietnambefore1994.WerefertoIMFTimeseriesuntil2002andtoOECDrevenues seriesfrom2003to2020.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemajoradjustmentsinVietnamareonsocialcontributions.Socialcontributionsarenotincluded hereeventhoughweareawarethattheyrepresentaconsiderableshare(atleastafter2010).

Category Adjustment

• SplitCIT/PITallthewaybackto1994

IncomeTaxation

SocialContributions

• CapitalshareofPIT:mean=26%; ↓ trend(30%to19%)

Wedonothavedataonsocialcontributionsuntil2010(theIMFdoesnot includeitandOECDonlyavailableafter2010).However,accordingtoSSA (2018),Vietnamhasalongstandingsocialsecuritypolicy(1961,pre-dating thewar).For2010-2020,socialcontributionsaccountsforaverysignificant partofthetotaltaxrevenue(4-6%ofGDP).Aswedonothavedatapriorto 2010,wedecidetotemporarilyexcludesocialcontributionshere.Thisdecision significantlyunderstatestheestimationsonrevenue/ETRonlaborincome,so weurgethereadertokeepthatinmindwheninterpretingthegraphs

PropertyTaxation

Verysmall(especiallyinOECDdata)butnon-zeroduringthewholeperiod DecentralizedRevenues Included

Notes

• Thedropinindirecttaxationin2020isgenuine,asitisconfirmedbythesource,theOECD revenuestatistics.

Sources

Source Firstyear Lastyear Interpolation OECD 1965 1998

Timeseries WeuseOECDdatafrom1965to2020.

Harmonization

DatafromOECDonAustraliapresentdetailedinformationonallthetaxcategoriesshownbelow.There arenotmajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• CapitalshareofPIT:mean=13%; ↓ trendpre-1985(15%to8%)and

↑ trendpost-1985(8%to15%)

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues Included

Notes

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1992 1969-1970,1989

OECD 1993 2020

Timeseries

Werefertohistoricalarchivedatafortheinitialperiod1965-1992,andweuseOECDfor theperiodsincethen.Wehighlightthatforthehistoricalarchiveperiod,useinformationfrom Amin (1998)for1969-1992tohelpassigntaxestotax-typesinspecificyears.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThereareadjustmentsonCameroonforincometaxation,socialcontributionsandpropertytaxes.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailableforperiod1969-1992.Interpolationofproportionalratiosusing1968and1993asreference,andcorroboratedbased onhistoricalsources.

• SmallunallocableincometaxrevenueduringtheOECDperiod(19932020)

• CapitalshareofPIT:mean=29%;fluctuatingbetween27%and30%

Useofexternalsource(RPC data)from1965to1993.Per SSA(2017) social securitypolicydatesto1969,while RPC hasdatafrom1960.However,itis asmalllevel(0.5%ofGDP)andonlyrisesabove1%ofGDPin1969.We adjustfortheperiod1989-1993byinterpolatinglevelsinsteadofrelyingon RPC (whichislowerthanOECDduringtheperiodoftheiroverlap)

Availableonlyintermittentlyfortheperiod1969-1992,thoughlimiteddecentralizedrevenuessuggestitmaynotbeamajorsourceoftaxcollection(but worthyoffurtherinvestigation).

Notdeterminedinhistoricalarchiveperiod(1965-1992),notincludedinOECD period(post-1993)

• The‘taxeunique’isatypeofindirecttax,replacingothers,asapreferentialtaxstatus(Gauthier, Soloaga,&Tybout, 2002),eventhoughitisnottheonlysourceofrevenueforCameroon(Gauthier &Gersovitz, 1997).Tradetaxesaccountedforupto50%oftotaltaxrevenueinthemid-1960s, butitfellto10%bythemid-1970sanddowntolessthan5%bythe1990s(shownin Amin (1998)).

Source Firstyear Lastyear Interpolation

OECD 1965 2020

Timeseries WeuseOECDdatafrom1965to2020.

Harmonization

DatafromOECDonCanadapresentdetailedinformationonallthetaxcategoriesshownbelow. Notwithstanding,theextremelyhighvaluesofthecapitalETRarecurrentlyunderrevision.See MethodologyNoteintheAtlaswebsiteforfurtherdetailsonthisissue.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• CapitalshareofPIT:mean=13%; ↓ trendpre-2008(14%to11%)and ↑ trendpost-2008(11%to13%)

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues Included

Notes

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1989 1977-1979,1987-1989

OECD 1990 2020

Timeseries Werefertohistoricalarchivedatabefore1990andweuseOECDfortheperiodsince then.Years1977-1979and1987-1989areinterpolated.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforCoted’Ivoirearemadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

• SplitCIT/PITnotavailablebefore1982.Interpolationofproportional ratiosbasedon1963and1986-1989(relyingforthatonICTDdata),and corroboratedinadditionalpolicysources.Inaddition,splitCIT/PIT fromOECDhasbeencorrected:allocationtoPIToftheconsistent ‘wedge’betweenthesocialcontributionsseriesaccordingtoOECDvs accordingtoICTD

• Unallocableincometaxrevenueinhistoricalarchivedata(allistaxon ‘b´en´efices’,allocatedasexplainedabove),verysmallinmagnitude,exists alsoinOECDdata

• CapitalshareofPIT:mean=13%; ↓ trendpre-2008(14%to11%)and ↑ trendpost-2008(11%to13%)

RelyonICTDvaluesfor1980-2010.For2010-2020,OECDvaluesdividedby theratioOECD/ICTDfrom2010.Formissingyearspriorto1980,interpolationbasedonavailableobservations

PropertyTaxation Included

DecentralizedRevenues Notdetermined

Notes

Source Firstyear Lastyear Interpolation

Historicalarchive 1967 1999 OECD 2000 2020

Timeseries Werefertohistoricalarchivedatafortheperiod1967-1999andweuseOECDdatafor theperiodsincethen.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforGhanaaremadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablepriorto1972.Backwardextrapolationfrom 1972to1965using1972asreference

• Smallbutnon-zerounallocableincometaxrevenueafter1989.Priorto 2000,historicalarchivehasverysmallrevenuefrom‘taxoninterestand dividends’thatisnotincludedassuchinOECDdata.Duetoitssmall magnitude,wedonotimplementanyfurtheradjustmenthere.

• CapitalshareofPIT:mean=28%; ↑ trendpre-1980s(28%to30%)and ↓ trendpost-1990(30%to24%)

Relyinexternalsources(RPC data)forthehistoricalarchiveperiodpriorto 2000

Localtax,verysmallbutnon-zeroinsomeyearsofhistoricalarchive.Not availableinOECDdata

Notfullydeterminedbefore2000(onlyavailablealocalpropertytaxforsome years).Notincludedafter2000(OECDdata)

• Ourestimationsmatchpriorliterature(Osei&Telli, 2017).Inaddition,thesameliterature corroboratesthestrangepatternsofthe1980sincludingthetwoconsecutiveperiodsoffiscal managementunderIMFrecoveryandstructuraladjustmentsprogramsduringthemiddleandend ofthedecade,intothe1990s.

40Madagascar

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1989 1969-1971,1974-1976,1981-1983

ICTD 1990 1998

OECD 1999 2020

Timeseries Werefertohistoricalarchivedataforyearspriorto1990,movetoICTDforthe1990sand useOECDfortheperiodsince1999.OurhistoricalarchivedatabaseforMadagascarislessexhaustive thanforothercountries.Indeed,weinterpolateasignificantnumberofyears.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforMadagascararemadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITavailablefortheyearsforwhichwehavedata(notfor interpolatedyears)

• Unallocableincometaxfor1965-1968includedinPIT,basedonadditionalpolicydocuments

• CapitalshareofPIT:mean=30%;stablepre-1975(29%-30%)and constantpost-1975(30%)

Relyonexternalsources(RPC data)forthewholeperiod.Extrapolationof constantvaluesforyearspost-2014

Verysmallbutnon-zeroduringthewholeperiod

Notdeterminedbefore1999(ICTDdata),andnotincludedafter1999(OECD data)

41Malaysia

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1989 1979-1980,1988

OECD 1990 2020

Timeseries Werefertohistoricalarchivefrom1965to1989andweuseOECDfortheperiodsince then.Weinterpolateyears1979,1980,and1988.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforMalaysiaaremadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablebefore1978.WeuseIMFhistoricaldatato assigntoPITandCIT.Extrapolatedbackwardsforyearspriorto1975 using1976asareference,andcorroboratedwithIMFinformation.

• Smallbutnon-zerounallocableincometaxrevenuesince1988

• CapitalshareofPIT:mean=20%; ↓ trend(28%to15%)

Relyonexternaldata(RPC data)before1971.Extrapolatevaluesfor19721999using1971(from RPC data)and2000(fromfirstyearofOECDthat includessocialcontributions)asreference

Notincludedinhistoricalarchive(pre-1990)andincludedbutbarelyzeroin OECDdata(post-1990)

Notdetermined

• Thereisagapinthestitchingyear1990,betweenhistoricalarchiveandOECD,of0.7percentage pointsofGDPforspecifictaxtypes.Thisshortfallisanartifactofwhatisincludedin‘indirect taxes’andin‘othertaxes’.Itseemslikehistoricalarchiveisincludingstampdutiesinunallocable incometaxeswhereasOECDallocatesthemtoothertaxes.Ontheotherhand,theOECDincludes amotorvehicletaxnotcollectedinhistoricalarchive.

• Thelate1980sdropinrevenueiscorroboratedinICTDdata(referringtoIMFArticleIV).

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1999 19661971-19731995

OECD 2000 2020

Timeseries

Weusehistoricalarchivedatafrom1965to1999andrefertoOECDfortheperiodsince then.Weinterpolateyears1966,1971-1973and1995.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemajoradjustmentsforMoroccoareonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablefrom1988to1996.Interpolationofproportionalratiosusing1987and1997asreference,andusinginformation fromhistoricaldocuments

• Unallocableincometaxrevenuebefore1999.Allocatedcompletelyto PIT,basedonadditionalpolicydocuments.

• CapitalshareofPIT:mean=28%;constantpre-1986(30%)and ↓ trend post-1986(30%to22%)

Externaldatapriorto2000(RPC data)

Weobservewealthtaxdataatafederallevelallthewaybackto1965.However,weincludelocalpropertytaxdataonlyafter2000(whenOECDbecomes available)

WeobservefederalandlocaltaxesintheOECDperiodbutwedonothave dataonsub-nationaltaxesinourarchivaldata

• Thelackofsub-nationalrevenuepriorto2000couldexplainthechangesobservedin1999-2000: i)thebumpinindirecttaxes(likelyrevenuethatwasincludedinnon-taxrevenueinourarchival data)andii)theincreaseinpropertytaxrevenue(localpropertytaxincludedafter1999).

• ThespikeinCITin1975aswellasthedipinindirecttaxesin1986aregenuine.

43Mozambique

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 2014 1991,2001

ICTD 2015 2020

Timeseries

Westarttheseriesin1975(firstpost-independenceyearwithconsistentdata).Werefer tohistoricalarchivefrom1965to2014andweuseICTDfortheperiodsincethen.Weinterpolateyears 1991and2001.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforMozambiqueareondirecttaxationandsocialcontributions.Additionally, theextremelyhighvaluesofthecapitalETRarecurrentlyunderrevision.SeeMethodologyNotein theAtlaswebsiteforfurtherdetailsonthisissue.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablebetween1994and2014.Weuse Castro, Junquera-Varela,Schenone,andTeixeira (2009)fortheperiod1994-2007 andextrapolateproportionalratiosfrom2007to2014

• CapitalshareofPIT:mean=30%;constanttrendpre-2010(30%)and ↓ trendpost-2010(30%to28%)

Relyonexternalsources(RPC database),constantvalueforthewholeperiod (0.001%).Extrapolationofthatconstantvalueforperiodpost-2014

NotincludedinhistoricalarchiveandclosetozeroinICTDdata

Notdetermined

• 1980sdipinrevenueisgenuine,perICTDcorroboration.

• Thebigincreaseinrevenueafter2010issupportedbytheoverlappingperiodbetweenhistorical archiveandICTD(2014-2015).

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1976 2005

ICTD 2006 2020 2018-2020

Timeseries

Westarttheseriesin1976.Werefertohistoricalarchivefrom1976to2005andweuse ICTDfortheperiodsincethen(year2005reliesonICTDforindirecttaxation).Weinterpolateyears 2018,2019and2020.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforNepalaremadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

• SplitCIT/PITnotavailableforpre-1987,2006-2009andpost-2017.For pre-1987:extrapolationbackusing1987asreference,andcorroborated usinghistoricalsources.For2006-2009,interpolationusing2005and 2010asreferences.Forpost-2017,extrapolationusing2017asreference

• CapitalshareofPIT:mean=29%;constanttrendpre-2005(30%)and ↓ trendpost-2005(30%to26%)

Relyonexternalsources(RPC data)forthehistoricalarchiveperiod,pre-2006 (andyears2010and2011)

Itevolvesfromsmall(0.2%ofGDP)inhistoricalarchive(2005)tozeroin ICTD(post-2005).Wehighlightthisissue,althoughitisnotsignificantfor ourpurposeduetothelimitedsizeofpropertytaxescollected

DecentralizedRevenues Notdetermined

Notes

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1999 1969-1972

OECD 2000 2020

Timeseries Werefertohistoricalarchivefrom1965to1999andweuseOECDfortheperiodsince then.Weinterpolatetheperiod1969-1972.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforNigeraremadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablebefore1975andin1999.Extrapolationback from1975to1965,confirmedinadditionaldocuments,andinterpolation ofyear1999usingOECDperiod

• UnallocableincometaxrevenueallocatedtoPITfortheperiod19751998(‘surunrˆole’and‘g´en´eral’areassignedtoPITinsteadofremaining unallocable,basedonpolicydocuments)

• CapitalshareofPIT:mean=29%;constanttrendpre-2005(30%)and ↓ trendpost-2005(30%to26%)

Relyonexternalsource(RPC data)through1998,interpolationof1999(outliervalue).Accordingto SSA(2017) thefirstsocialsecuritylawwasin1967, sowedonotincludedatafrom RPC before1967(RPC estimatesitat0.2% ofGDP)

Verysmallbutnon-zeroduringthewholeperiod(withsomediscrepancybetweenhistoricalarchiveandOECDestimatesofpropertytaxin1999)

Notdeterminedforhistoricalarchivedata(1965-1999),notincludedforthe OECDperiod(2000-2020)

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1989 1965-1967

OECD 1990 2020

Timeseries

Werefertohistoricalarchivefrom1965to1989andweuseOECDfortheperiodsince then.Valuesforyears1965and1967areextrapolatedbackwards.Wecalculatetheratiosofeachtax category’s(fromhistoricalarchivedata)shareoftotalrevenue(from RPC data)in1968,andextrapolate thembackto1965usingaggregatedvaluesfrom RPC datafor1965to1967.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforPeruaremadeonincometaxationandsocialcontributions.

Category Adjustment

• SplitCIT/PITnotavailablefrom1983to1989.Interpolationusing1982 and1990asreference

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• Unallocableincometaxsmallbutnon-zeroduringthewholeperiod. AllocatedallofittoPITfortheinterpolatedperiod(1983-1989),based onhistoricalsources

• CapitalshareofPIT:mean=27%; ↓ trend(30%to22%)

Externaldata(RPC data)forthehistoricalarchiveperiod(pre-1990)

OECDaccountsforthreetypesofwealthtaxes(individual,corporateandfinancialandcapitaltransactions),whereashistoricalarchivedataonlyaccounts foroneheading‘impuestoalpatrimonio’.Thereisagapbetweenhistorical archiveandOECDthatmightbeexplainedbythefactthatsomeofthelatter taxescollectedintheOECDwerelocal-level

OECDincludesinformationonsub-nationalleveltaxes(explicitelyafter2000, butthesmoothevolutionsuggesttheyareincludedintotalrevenuein19902000).Onthecontrary,theevidencefrompropertytaxes(above)indicatesa lackofinformationregardingdecentralizedrevenuesinhistoricalarchivedata. However,thematchingfortherestofthecategoriesintheoverlappingperiod (1990-1994)suggeststhatothersub-national-leveltaxesarenotsignificant

• Thereisasmalljumpin1990fromtheevolutionofpropertytaxesexplainedabove.However,we areconfidentthattherestoftheevolutionisgenuine,astherestoftaxcategoriesmatchperfectly betweenhistoricalarchivedataandOECDdatafortheoverlappingperiod(1990-1994)

Source Firstyear Lastyear Interpolation ICTD 1994 2020 2006-2008

Timeseries WestartthedataseriesforSaudiArabiain1994.WerefertoICTDforthewholeperiod. Weinterpolatefromyear2006to2008.

Harmonization

ThemainadjustmentsforSaudiArabiaaremadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

• AssumeequalsplitforunallocatedincometaxrevenuesbetweenPIT andCIT,hardtocorroborateduetolimitedhistoricalsources,butnote thatsmallinmagnitude

• CapitalshareofPIT:mean=15%;constant

Minusculebutnon-zeroduringthewholeperiod.Werelyonexternaldata (RPC data).Extrapolationafter2014

Notincludedduringthewholeperiod

DecentralizedRevenues Notdetermined

Notes

• Directnon-oiltaxrevenueisalmostinexistent.However,wehighlightthatnon-taxrevenueis alwaysmorethan25%andsometimesasmuchas50%ofGDP.

Source Firstyear Lastyear Interpolation

ICTD 1994 2020

Timeseries Inkeepingwithourruletonotincludecommunistcountriespriortotheirtransition,we donotincludeUkraineinourcalculationspriorto1994.WerefertoICTDfortheperiodsincethen.

Harmonization Datapost-1994fromICTDonUkrainepresentdetailedinformationonallthetaxcategoriesshown below.Therearenotmajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITallthewaybackto1994

IncomeTaxation

• Verysmallunallocableincometaxinthe2000s

• CapitalshareofPIT:mean=25%; ↑ trendpre-2000(25%to29%)and ↓ trendpost-2000(29%to23%)

SocialContributions Included

PropertyTaxation Verysmallbutnon-zeroduringthewholeperiod

DecentralizedRevenues Notdetermined

Notes

Sources

Source Firstyear Lastyear Interpolation ICTD 1994 2020 2013-2014

Timeseries Inkeepingwithourruletonotincludecommunistcountriespriortotheirtransition,the dataseriesforUzbekistanstarts1994.WerefertoICTDforthewholeperiod.Years2013and2014are interpolated

Harmonization

ThemainadjustmentsforUzbekistanareonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

• SplitCIT/PITnotavailablesince2003.Extrapolationofproportional ratiosusing2002asreference,andcorroboratedwithrecentpolicydocuments

• Unallocableincometaxrevenue(especiallyrelevantsince2003),allallocatedtoPITtobasedonpolicydocuments

• CapitalshareofPIT:mean=27%; ↓ trend(30%-22%)

SmallvaluesfromICTDintheearly1990s.Notavailablefrom1995-1998: interpolationusing1994and1999asreference.Othersources(IMF,WB) excludeitfromthedefinitionoftaxrevenueforUzbekistan

PropertyTaxation Included

DecentralizedRevenues Included

Notes

• OurestimationgivesveryclosevaluestopriorliteratureonUzbekistan.Thisisthecaseforthe wholeperiodanalysed:fortheendofthe1990s(slightlybelow DavoodiandGrigorian (2007)and derHoek (2008)),formid2010s(Mokhtari&Ashtari, 2012)andforrecentyears(check World Bank(2020) or IMF(2019)).

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1979 1976-1978

ICTD 1980 1989

OECD 1990 2017

Timeseries Werefertohistoricalarchivefrom1965to1979.WerelyonICTDfromthesubsequent decade(1980-1989)anduseOECDfortheperiodsince1990.Weinterpolateyears1976,1977and1978 (wehaveoveralltaxrevenuefortheseyears).Dataongovernmentrevenueisnotavailablebeyond2017.

Linktohistoricalarchivedata: clickhere

Harmonization

ThemainadjustmentsforVenezuelaaremadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablepriorto1971,extrapolatetheshareofCIT oftotalincometaxrevenuebackfrom1971to1965andverifyusing historicalsources

• Unallocableincometaxrevenuecategory,useinformationfrom(Barreix, Ben´ıtez,&Pecho, 2017; McLureJr, 1992; Zolt&Bird, 2005),toassign allofittoPIT

• CapitalshareofPIT:mean=23%;nocleartrend(fluctuatingbetween 22%and26%)

RelyonexternaldatapriortoOECDfirstyearofobservation( RPC database). Novaluespost-2012:assumed2013-2017valuesequaltothelevelofsocial contributionsin2012

WedonotcollectanywealthorpropertytaxpriortoOECDdata

TheOECD,doesincludeanylocaltaxes

• Thereisajumpinstitchingyear1980(historicalarchivetoICTD).Thisgapiswithinthenormal rangeofVenezuelayear-to-yearpatterns,andconsistentwiththepatternfrom1980-81.

• Intheearlyperiod,pre-1970,asignificantproportionofrevenuewascomingfromnon-taxsources, nationalizedminingandextractiveindustry.Whilesomerevenuefromextractiveindustryremainedpublicandnon-taxinthelatereras,perhapsthestrictly tax studyinVenezuelaisnot anentirelyrevealingpictureoftheirpublicfinances.Thismaybethecaseinmanypetroleumexportingstates.

Source Firstyear Lastyear Interpolation

Historicalarchive 1990 1997

OECD 1998 2012

Timeseries

Ourfirstyearobservationis1990(yearofunificationandcreationofthemodernRepublic ofYemen),andstopsin2012(sincetheYemeniCrisisbegan).Werefertohistoricalarchivedatafor theperiod1990-1997andweuseICTDdatafortheperiod1998-2012.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforYemenaremadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

• SplitCIT/PITnotreliablebefore1998andnotavailableafter2003(and inyear2001).Pre-1998:extrapolationbackwardofproportionalratios using1998asreference,confirmedwithhistoricalsource.Post-2003: extrapolationforwardofproportionalratiosusing2002asreference,and corroboratedwithrecentpolicydocuments

• CapitalshareofPIT:mean=30%;constant

Relyonexternalsources(RPC database).Itisconstantataverysmall magnitude(0.1%ofGDP)

ICTDincludesaextremelysmallamountofpropertytaxduringtheyearsof itshighestprecision(1998-2002),butwehavethiscategorymissingbeforeand after DecentralizedRevenues Notdetermined

Notes

• Itisworthkeepinginmindthatnon-taxrevenue(presumablyalwaysoil/resourcerevenues)is alwaysimportantinYemen—from8%ofGDPin1990(historicalarchive)toahighof30%(ICTD) by2008.

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 2020

Timeseries WerefertohistoricalarchivebasedonthereportsbytheMinistryofFinanceforthe wholeperiodfrom1965to2020.

Linktohistoricalarchivedata: clickhere

Harmonization

HistoricalarchivedataonTaiwanpresentsdetailedinformationonallthetaxcategoriesshownbelow. Therearenomajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• CapitalshareofPIT:mean=16%; ↓ trendpre-1980(23to15%)and constantpost-1980(15%)

SocialContributions Notincluded

• The MinistryofFinance websitelistsitstaxcollectionsbyOECDclassification,andleavessocialcontributionseriesblank.However, thispolicy source includessocialcontributionrevenuefrom2002(andwecouldcalculateituntil2000)

• Per 2004StatisticalDataYearbook [seechapter16]itwouldseemthat thereareseveraldecentralizedsocialinsurancemechanisms,perhapsenforcedandcatalogedifnotcollectedatanationallevel.Unfortunately, thereseemstobenocentralizedcatalogofhistoricalstatisticsonthe sizeofthesecontributions,noracleardemarcationbetweenthepublic andprivatepartsofthesecontributions.

• Ifthesocialsecuritysystemisorganizedprivatelyinbothcontributions andexpenditures,thenitcouldberightlyexcludedfromrevenues.However,thiswouldblurthelinebetweenwhatisataxandwhatisarequired (private)expenditure

PropertyTaxation Included

DecentralizedRevenues Determined

Notes

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1979

ICTD 1980 1999 OECD 2000 2020

Timeseries Werefertohistoricalarchivefrom1965until1979,weuseICTDforthetwosubsequent decades(1980-1999)andrelyonOECDfortheperiodsince2000.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforMaliaremadeonincometaxation,socialcontributionsandpropertytaxes.

Category Adjustment

IncomeTaxation

• SplitCIT/PITnotreliablebefore1980.Extrapolationbackofproportionalratiosfrom1980to1965,verifiedusingadditionalhistorical sources

• SplitCIT/PITnotavailableinyears1982-1983and2000-2001.Interpolationofproportionalratiosusingyearsforwhichwehavedata(before andaftermissingobservations)

• Smallbutnon-zerounallocableincometaxrevenueduringthewhole period

• CapitalshareofPIT:mean=30%;constant

SocialContributions Relyonexternalsources(RPC database)before2000(firstyearofOECD)

PropertyTaxation Smallbutnon-zeroduringthewholeperiod.Interpolationofyears1975-1983 DecentralizedRevenues Notdeterminedbefore1999,notincludedforOECDdata

Notes

• TherearelimitedhistoricaldocumentsonMali’shistoricalpublicfinance. Founou-Tchuigoua (1989)whodiscussedapurportedlong-runpublicfinancecrisis,didnotattempttomeasure tax/GDP.However,thedisaggregatedpresentationofindirecttaxrevenueasmorethantwice theamountofdirecttaxrevenuematcheswellourownfindings.

54BurkinaFaso

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1999 1974,1980-1983,1987

OECD 2000 2020

TimeSeries

Werefertohistoricalarchivefrom1965to1999andweuseOECDfortheperiodsince then.Severalyearsinterpolated,coincidewithperiodsofpoliticalunrestandviolence.Fortheperiod 1993-99,weuse ICTD foroveralltax/GDPlevel5 andinterpolatecompositional‘within-tax’ratiosfrom 1992(historicalarchive)to2000(OECD).

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforBurkinaFasoaremadeonsocialcontributionsandpropertytaxes.

Category Adjustment

• SplitCIT/PITavailableforthenon-interpolatedyears

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• Smallbutnon-zerounallocableincometaxduringtheOECDperiod (post-2000)

• CapitalshareofPIT:mean=30%;constant

Relyonexternalsource(RPC database)fortheperiodpre-OECD(priorto 2000)

Smallbutnon-zeropropertytaxesduringthewholeperiod.Period1982-1999 isfullyinterpolated

Notdeterminedforhistoricalarchiveperiod,anddoesnotincludetaxrevenuescollectedbylocalauthoritiesbutincludesrevenuescollectedbycentral governmentonbehalfoflocalauthorities(inallperiods)

5 WealsointerpolateforwardthecomparisonratioofhistoricalarchivetaxleveltoICTDtaxlevelin1992.

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 2015 1998-1999

ICTD 2016 2020

Timeseries

Werefertohistoricalarchivedatafrom1965to2015,andweuseICTDfortheperiod sincethen.WescalethehistoricalarchivedatabyICTDfor2015-2020usingthe2014ratiosbetween thetwosourcesasreference.Years1998-1999areinterpolated.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforSriLankaaremadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

• SplitCIT/PITmissingornotreliablepriorto2001forhistoricalarchive data.WerelyonsplitCIT/PITaccordingto ICTD availablefrom1980, andextrapolatebackto1965corroboratedwithhistoricalsources

• Smallunallocableincometaxafter2002

• CapitalshareofPIT:mean=25.5%; ↓ trend(30to16%)

Relyonexternalsource(RPC database)forthewholeperiod.Extrapolation forwardto2020usingtheratioRPCtoICTDfrom2013(lastyearavailable forRPC)

Verysmallbutnon-zerovaluesavailablefrom1982to1997.Notavailablefor therestoftheperiod

DecentralizedRevenues Notdetermined

Notes

• Ravinthirakumaran (2011)corroboratesourarchivallong-runpublicfinanceseriesfortheyears 1977-2009,whichalsohelpsustrustthecontinuoustimeseriesfromtheearlierera.

Sources

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 2004

OECD 2005 2020

Timeseries Werefertohistoricalarchivedatafrom1965to2004,andweuseOECDfortheperiod sincethen.Wescalethehistoricalarchivedataby ICTD for1990-1993usingthe1989and1994ratios betweenthetwosourcesasreference.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforMalawiaremadeonsocialcontributions.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• CapitalshareofPIT:mean=30%,constant

Relyonexternalsource(RPC database). SSA(2019) lists2011asthefirst yearforthepensionpolicy.

Notincluded,neitherinarchivaldatanorinOECD

Notdeterminedinhistoricalarchiveperiod,notavailableinOECDperiod

• Ourestimateinthehistoricalperiodisslightlylowerthanthatof,e.g., ShaliziandThirsk (1990) and Chipeta (1998),bothsourcedfromMalawigovernmentreports,butwematchthisseries ontrends.ItispossiblethattheGDPdenominatorfromMalawi’sgovernmentatthattimeis overestimated,vis-a-vistheWIDfigureweuse.Ourhistoricalarchivelevelsdomatchthoseofthe ICTDinthe1980s,aswell.

• Thespikeinpersonalincometaxrevenuein2000-01isgenuine,perrawdata,andrepresenteda sharpupturninthe‘actual’vs.budgeted(previouslypredicted)revenuesforthatyear.

Source Firstyear Lastyear Interpolation

Historicalarchive 1965 1979 1978,1979

ICTD 1980 1989

IDB-CIAT 1990 2020

Timeseries Werefertohistoricalarchivedatafrom1965to1979,thenuseICTDforthe1980sand finallyrelyonIDB-CIATfortheperiodsince1990.Years1978and1979areinterpolated.Werefine thehistoricalarchiveusing WorldBank(1980) forcentralgovernmentrevenuesfor1960-77.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforChilearemadeonincometaxation,socialcontributionsandpropertytaxes.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

• SplitCIT/PITnotavailableforyears1987-1989,interpolateusingendpointsasreferencesanddrawonadditionalhistoricalsources

• CapitalshareofPIT:mean=21.6%, ↓ trend(26to14%)

RelyonexternalsourcesforperiodpriortoIDB-CIATdata(1990).For197085weuse Corbo (1989)andfor1965-1975wecomplementitwithofficial governmentpublications(consistentwithevidencefrom Cerda (2005))

Relyonexternalsourcesfortheperiodafter1990(UNdata).Interpolationof theperiod1980-1989using1979and1990asreference

DecentralizedRevenues Included

Notes

58Kazakhstan

Sources

Source Firstyear Lastyear Interpolation

ICTD 1994 1998

OECD 1999 2020

Timeseries Inkeepingwithourruletonotincludecommunistcountriespriortotheirtransition,we donotincludeKazakhstanbefore1994.WerefertoICTDdatafrom1994to1998anduseOECDfor theperiodsincethen.

Harmonization

ThemainadjustmentsforKazakhstanaremadeonincometaxation,socialcontributionsandproperty taxes.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

• SplitCIT/PITnotavailablefrom1994to1998.Extrapolationofproportionalratiosbackusing1999asreference

• CapitalshareofPIT:mean=16.9%, ↓ trend(22to15%)

Availablefrom1995.Extrapolationbackfor1994(consistentwith SSA(2019))

RelyonhistoricalarchivefortheperiodpriortoOECD(pre-1999) DecentralizedRevenues Included

Notes

• OilrevenueisenormouslyimportantforKazakhstan,butmuchofitisnon-taxrevenue

Sources

Source Firstyear Lastyear Interpolation

HistoricalArchive 1986,1990-1991

ICTD 2010 2020

Timeseries

Werefertohistoricalarchivedatafrom1965to2009.WeusetheevolvingratioofhistoricalarchivetoICTDtotaltaxtake(level)tointerpolatetheoverallleveloftax/GDPinmissingyears, andthenweinterpolatethevaluesof‘within’ratiosforthecomponenttaxes.Werelyonthetotaltax revenuefromICTDfortheperiodsince2010.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforZambiaaremadeonincometaxation,socialcontributionsandpropertytaxes.

Category Adjustment

• SplitCIT/PITavailableforallthenon-interpolatedyears

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• Verysmallbutnon-zerounallocableincometaxrevenuesince1972

• CapitalshareofPIT:mean=16.9%, ↓ trend(22to15%)

Relyonexternalsource(RPC database).Extrapolationofconstantvaluefrom 2014to2020

Verysmallbutnon-zeroduringthewholeperiod

Notdetermined

• DiJohn (2010),citing WeeksandMcKinley (2009),corroboratethegeneraltrendsandlevelsof ourdatain1990-2004,althoughwehavetointerpolatebecausewearemissingmanyyears.

• Colclough (1988)hasahigherestimatethandoourHAdatafortheperiod1975-85,andmatches theICTDdatafromthe1980onward.However,examinationofourrawdatashowsthatwehave ‘miscellaneouscapitalreceipts’intherawdata,andthesearenotonlyhighlyvariantfromyear toyearinourdata,butwealsodonotwanttoclassifythemastaxrevenues.Itseemslikelythat thegapbetweenhistoricalarchiveandICTD-IMFin1975couldalsobewhatisdrivingthegap betweenhistoricalarchiveandRPCtotaltaxtakes.

Source Firstyear Lastyear Interpolation ICTD 1994 2020

Timeseries Inkeepingwithourruletonotincludecommunistcountriespriortotheirtransition,we donotincludeRomaniabefore1994.WerefertoICTDdataforthewholeperiodsincethen.

Harmonization

DatafromICTDonRomaniapresentdetailedinformationonallthetaxcategoriesshownbelow.There arenotmajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITavailableforallperiodssince1994

IncomeTaxation

• Verysmallbutnon-zerounallocableincometaxrevenue

• CapitalshareofPIT:mean=21.2%, ↓ trend(25to17%)

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues Included

Notes

Source Firstyear Lastyear Interpolation

HistoricalArchive 1965 1984

ICTD 1985 1998 OECD 1999 2020

Timeseries Werefertohistoricalarchivedatafrom1965to1984.WeuseICTDfrom1985to1998, interpolatingtherelativeshareoftaxesuntil1990using1984and1991asreference.WerelyonOECD fortheperiodsince1999.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforSenegalaremadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITextrapolatedbackfrom1972to1965andinterpolatedfor 1991-1992,corroborateusinghistoricalsources

• Smallbutnon-zerounallocableincometaxrevenueinmultipleyears

• CapitalshareofPIT:mean=29.5%,fluctuation(29-30%)

Relyonexternalsource(RPC database)fortheperiodpre-OECD(pre-1998)

Smallbutnon-zeroduringthewholeperiod

NotdeterminedbeforeOECD,notincludedforOECDperiod

• Ourestimationforthehistoricalarchiveperiodmatches(withslightdifferences)previousliterature (Boye, 1990; Chelliah, 1971)

Sources

Source Firstyear Lastyear Interpolation OECD 1965 2020

Timeseries WerefertoOECDallthewaybackto1965.

Harmonization

DatafromOECDonNetherlandspresentdetailedinformationonallthetaxcategoriesshownbelow. Therearenotmajoradjustmentsmade.

Category Adjustment

• SplitCIT/PITavailableforallperiods

IncomeTaxation

• CapitalshareofPIT:mean=13.6%, ↓ trend(15to11%)

SocialContributions Included

PropertyTaxation Included

DecentralizedRevenues Included

Notes

63Guatemala

Sources

Source Firstyear Lastyear Interpolation

HA 1965 1989 1984-1989*

OECD 1990 2020

Timeseries Werefertohistoricalarchivedatafrom1965to1989andweuseOECDfortheperiod sincethen.Weinterpolatetheyears1986-1989using ICTD’soveralllevelsbutrelyingontheshareof eachtaxcategoriesusing1983and1990asreference.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforGuatemalaaremadeonincometaxationandsocialcontributions.

Category Adjustment

• SplitCIT/PITallthewaybackto1965

IncomeTaxation

• TheunallocableincometaxrevenueinOECDsince1995isalwaysa ‘solidaritytax’,whichisapparentlyassessedoncorporations(per PwC 2020),sowere-assignitasaCIT

• CapitalshareofPIT:mean=27.8%,fluctuation(30-25%)

SocialContributions Lackofdatafortheperiodpre-1990(andprobablystartsin1969or1977, per SSA2017).WeuseOECD’slevelfrom1990extrapolatedbackto1978 withoutre-scaletomatchthe RPC number,asitdoesnotappearthatthere isafixedproportionalgapbetweenthetwo

PropertyTaxation Reallysmallbutnon-zeroduringthewholeperiod DecentralizedRevenues NotdeterminedbeforeOECD,includedforOECDperiod

Notes

• Ourestimationmatchespreviousliteraturefortheearlyhistoricalarchiveperiod(Newlyn, 1985).

Source Firstyear Lastyear Interpolation

HA 1965 1982

ICTD 1983 2009

OECD 2010 2020

Timeseries Werefertohistoricalarchivedatafrom1965to1982,weuseICTDfortheperiod19832009andrelyonOECDfortheperiodsincethen.Weinterpolatetheshareofeachtaxcategoryfor periods1978-1980and2006-2009.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforChadaremadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

DecentralizedRevenues

Notes

• SplitCIT/PITnotavailablefor1978-1993.Interpolationofproportional ratiosusing1977and1994,andcorroboratewithhistoricalsources

• Verysmallbutnon-zerounallocableincometaxrevenueduringthewhole period

• CapitalshareofPIT:mean=30%,constant

Relyonexternalsource(RPC database)fortheperiod1976to2010

Verysmallbutnon-zeroafter1994

NotdeterminedbeforeOECD,notincludedforOECDperiod

• Thevolatilityinrecentyearsisnotablebutalsogenuine(corroboratedbothinourrawdataand inICTD).

Sources

Source Firstyear Lastyear Interpolation ICTD 1994 2009

Timeseries Inkeepingwithourruletonotincludecommunistcountriespriortotheirtransition,we donotincludeCambodiabefore1994.WerefertoICTDforthewholeperiodsince1994.

Harmonization

ThemainadjustmentsforCambodiaaremadeonincometaxationandsocialcontributions.

Category Adjustment

IncomeTaxation

SocialContributions

PropertyTaxation

• SplitCIT/PITnotavailablefortheyears1994,2004-05,and2015.Interpolationofproportionalratiosusingyearsbeforeandafter

• Verysmallbutnon-zerounallocableincometaxrevenue

• CapitalshareofPIT:mean=29%, ↓ trend(30to26%)

Relyonexternalsource(RPC database).Per SSA(2018),thefirstsocial securityprogrambeganin1997(ourdatastartsin1998)

Verysmallandinmostperiodszero

DecentralizedRevenues Notdetermined

Notes

• The WorldBank(2020) doesshowasimilarpatterntotheoneweobserve,atleastinthemodern period(theirdatabeginsin2002).

Source Firstyear Lastyear Interpolation

Historicalarchive 1973 1989

OECD 1990 1992

IDB-CIAT 1993 2020

Timeseries Werefertohistoricalarchivefrom1973(firstyearofobservation)until1989.Weuse OECDdatafortheperiod1990-1992,andweuseIDB-CIATdatafortheperiodsince1993.

Linktohistoricalarchivedata: clickhere.

Harmonization

ThemainadjustmentsforEcuadoraremadeonincometaxation.

Category Adjustment

IncomeTaxation

• SplitCIT/PITnotavailablefor1990-1992.Interpolationofproportional ratiosusing1989and1993asreferences

• UnallocableincometaxduringIDB-CIATperiod.Useadditionalinformationfrom SRI(2020),Ecuador’staxcollectionauthority,toassign portiontoPIT.

• Unallocableincometaxin2019-2020allocatedproportionallybasedon theobservedsplitCIT/PITin2018

• CapitalshareofPIT:mean=28%, ↓ trend(30to27%)

SocialContributions Included

PropertyTaxation

Smallbutnon-zeroduringthewholeperiod

DecentralizedRevenues Included

Notes

• OilrevenueisthebiggeststoryinEcuador.Itrosefromzeroto20%ofpublicsectorrevenuefrom 1970-74,andto48%by1982,accordingto Bocco (2016).Meanwhilenon-oiltaxrevenuedecreased from10.1%ofGDPin1972to5.4%in1983(ibid.).However,differentdatasourcescategorized thisprominentsourceofrevenueaccordingtovaryingguidelinesaswellastheshareofpublic revenuetoggledbetweennon-taxexpropriatedandprivatizedCITrevenue.

• Priorto1996,itisnotclearwhatpartofpublicrevenueisfromoilandwhatisnot.Wetherefore useIMFhistoricaldataandarriveataseriesfrom1973-89thatnearlyagreeswiththeOECD by1990(whenOECDbegins).However,thehistoricalarchivemayhaveerroneouslyclassifiedoil revenueasindirecttaxationinsteadofCIT.Ontheotherhand,wecorroborateOECDandoilvs. non-oilstatisticsbyreferencetotheMinistryofFinance(MFE).

• Eventhoughoilrevenuemakesthecomparisonhard,ourestimationsmatchesconsiderablywell withpreviousliterature.First, CEPAL(1991) corroboratesourlevelsforpre-OECDperiod(includingthe1985spike).Second,fortheperiod1989-1992, Garc´ıaandUquillas (1992)agreewith thevaluesfromOECD.Formorerecentdecades,differentsources(Bucheli(2014), Fretes-Cibils, Shankar,andCurrie (2008), MinisteriodeEconomiayFinanzas(2016))matchourestimation.

Source Firstyear Lastyear Interpolation

ICTD 1980 2020 1998

Timeseries WerefertoICTDforthewholeperiodsince1980(yearofindependence).Year1998is interpolated.

Harmonization

ThemainadjustmentsforZimbabwearemadeonincometaxationandsocialcontributions.

Category Adjustment

• SplitCIT/PITallthewaybackto1980

IncomeTaxation

• Unallocableincometaxcategoryduringthewholeperiod,mostrelevantbetween2010-2015(around1%ofGDP),useadditionalsourcesto allocatetofirmsversusworkers

• CapitalshareofPIT:mean=29.8%,smallfluctuations(30to29%)

SocialContributions Relyonexternalsource(RPC database)onlysince1989,following SSA(2017)

PropertyTaxation Verysmallduringthewholeperiod,andzeroafter1998

DecentralizedRevenues Notdetermined

Notes

• Thedropinrevenuesduringtheperiod2005-2009correspondswiththepeakofthehyperinflation crisisinthecountry.

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