tailieunhanh - Stock markets and tax revenue

Many developing countries struggle to raise taxes. The present work considers the financial sector – specifically the stock market sector – as a boon for tax revenue. Historically I find that higher stock market total value traded sectors are associated with more tax revenue. Using a panel data set of 96 countries over the period 1990-2008 I find that stock markets positively influence government’s ability to raise tax revenue. | Journal of Applied Finance Banking 2015 1-16 ISSN 1792-6580 print version 1792-6599 online Scienpress Ltd 2015 Stock Markets and Tax Revenue Bojan Ilievski1 Abstract Many developing countries struggle to raise taxes. The present work considers the financial sector - specifically the stock market sector -as a boon for tax revenue. Historically I find that higher stock market total value traded sectors are associated with more tax revenue. Using a panel data set of 96 countries over the period 1990-2008 I find that stock markets positively influence government s ability to raise tax revenue. JEL Classification Codes O11 H2 G2 Keywords Panel data Stock Market Stock Market Total Value Traded Tax Tax Revenue 1Western Oregon University. E-mail ilievskib@ Article Info Received December 19 2014. Revised January 25 2015 Published online May 1 2015 2 Stock Markets and Tax Revenue 1 Introduction Since the early 1990 s stock markets have opened in many countries across the world. Partly because theoretical and empirical literature has established a positive and significant correlation between stock market development and economic growth2. In the present work rather than focusing on the link between stock markets and economic growth I focus on the link between tax revenue and stock market total value traded. A reference point is the recent proposal by the IMF OECD UN and World Bank on the development of more effective tax systems3 with the following call to action Identify key capacity constraints faced by developing countries in their tax systems and make recommendations on capacity building to i improve efficiency and transparency of tax administrations and ii strengthen tax policies to broaden the tax base and combat tax avoidance and evasion. 4 In many developing countries a weak or opaque financial system is a serious capacity constraint for tax collection leading to inefficiency a narrow tax base and routine tax avoidance. So what happens to tax revenue