The quality of tax administration and firm performance: evidence from developing countries

  • Era Dabla-Norris
  • Florian MischEmail author
  • Duncan Cleary
  • Munawer Khwaja


Tax compliance costs tend to be disproportionately higher for small and young businesses. This paper examines how the quality of tax administration affects firm performance for a large sample of firms in emerging market and developing economies. We construct a novel, internationally comparable, and multidimensional index of tax administration quality (the TAQI) using information from the Tax Administration Diagnostic Assessment Tool. We show that better tax administration attenuates the productivity gap of small and young firms relative to larger and older firms, a result that is robust to controlling for other aspects of tax policy and of economic governance, alternative definitions of small and young firms, and measures of the quality of tax administration.


Tax administration Firm performance Firm productivity 

JEL Classification

E62 H20 H30 H83 



We thank Vitor Gaspar, Michael Keen, Katherine Baer, Justin Zake, Laura Jaramillo, Andrew Masters, Andrew Okello, Alexander Tieman, Peter Dohlman, Borja Gracia, Raphael Espinoza, Shafik Hebous, and participants at the seminar in the IMF’s Fiscal Affairs Department for helpful comments and for facilitating access to the TADAT and RA-FIT databases. Fedor Miryugin and Drew Waddington provided excellent research assistance.


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Copyright information

© International Monetary Fund (IMF) 2019

Authors and Affiliations

  • Era Dabla-Norris
    • 1
  • Florian Misch
    • 1
    Email author
  • Duncan Cleary
    • 2
  • Munawer Khwaja
    • 3
  1. 1.International Monetary FundWashingtonUSA
  2. 2.Revenue Irish Tax and CustomsDublin 2Ireland
  3. 3.WashingtonUSA

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