Shadow economy, corruption, and tax performance: A study ofBRICS

In this paper, we analyse the effects of economic and political variables on tax revenue performance of BRICS for the period 1996-2017. After checking unit root and cointegration of the variables, this study employs fully modified ordinary least square (FMOLS) to investigate long-run impacts of the explanatory variables. Empirical results suggest us that, economic development, trade openness and control of corruption are revenue-enhancing factors for BRICS, whereas the agriculture sector discourages the tax revenue performance. However, the size of the shadow economy in BRICS undermines the productive implication of corruption control and economic development in revenue generation. Based on the results, few policy options are also discussed in this paper.

Automated summary

This paper analyzes the effects of economic and political variables on tax revenue performance of BRICS for the period 1996-2017. The study finds that economic development, trade openness, and control of corruption enhance tax revenue, while the agriculture sector and shadow economy size hinder tax performance. Some policy options are also discussed based on the results.