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Institutional environment and tax performance: empirical evidence from developing economies
Prianto Budi Saptono* 
Gustofan Mahmud*
Gustofan Mahmud
Affiliation: Pratama Kreston Tax Research Institute, Jakarta, Indonesia; Accounting Study Program, Sekolah Tinggi Ilmu Ekonomi (STIE) Swadaya, Jakarta, Indonesia
 0000-0001-8580-8049
Article | Year: 2022 | Pages: 207 - 237 | Volume: 46 | Issue: 2 Received: October 22, 2021 | Accepted: February 4, 2022 | Published online: June 1, 2022
|
FULL ARTICLE
FIGURES & DATA
REFERENCES
CROSSMARK POLICY
METRICS
LICENCING
PDF
|
Variable
|
Description
|
N
|
Mean
|
Std. Dev
|
Min
|
Max
|
Source
|
|
TRit
|
Total taxes
(% of GDP)
|
977
|
15.196
|
5.624
|
0.915
|
39.988
|
A
|
|
DTRit
|
Direct taxes
(% of GDP)
|
977
|
5.183
|
3.099
|
0.250
|
20.797
|
A
|
|
DTRit
|
Indirect taxes
(% of GDP)
|
977
|
7.676
|
3.732
|
0.099
|
18.622
|
A
|
|
TTRit
|
Trade taxes
(% of GDP)
|
977
|
1.942
|
2.129
|
0.00003
|
13.436
|
A
|
|
VAit
|
Voice and
accountability
(-2.5 to 2.5 scale)
|
977
|
-0.320
|
0.663
|
-1.971
|
1.152
|
B
|
|
PSit
|
Political stability
and no violence/terrorism
(-2.5 to 2.5 scale)
|
977
|
-0.409
|
0.734
|
-2.699
|
1.263
|
B
|
|
GEit
|
Government
effectiveness
(-2.5 to 2.5 scale)
|
977
|
-0.338
|
0.575
|
-1.848
|
1.267
|
B
|
|
RQit
|
Regulatory quality
(-2.5 to 2.5 scale)
|
977
|
-0.244
|
0.564
|
-2.071
|
1.127
|
B
|
|
RLit
|
Rule of law
(-2.5 to 2.5 scale)
|
977
|
-0.429
|
0.530
|
-1.823
|
1.077
|
B
|
|
GVNitit
|
Governance index
|
977
|
0.014
|
0.996
|
-2.605
|
2.842
|
C
|
|
CCit
|
Control of
corruption
(-2.5 to 2.5 scale)
|
977
|
-0.471
|
0.543
|
-1.826
|
1.647
|
B
|
|
ICAPit
|
Log of GDP per
capita (current US$)
|
977
|
4,132.364
|
3,470.211
|
237.757
|
2,2942.61
|
A
|
|
INDit
|
Industry, value
added
(% of GDP)
|
977
|
29.293
|
10.593
|
9.476
|
84.349
|
A
|
|
INFit
|
Inflation, consumer
price index
(annual %)
|
977
|
111.397
|
3,283.225
|
-3.749
|
10,2629.8
|
A
|
|
TOPit
|
Exports plus imports
(% of GDP)
|
977
|
80.000
|
32.157
|
16.141
|
210.374
|
A
|
|
SHDit
|
Shadow Economy
Output
(% of GDP)
|
883
|
34.842
|
10.384
|
8.552
|
66.137
|
D
|
|
POPit
|
Population Size
(Persons in thousands)
|
977
|
70,300
|
222,000
|
108.3
|
1,400,000
|
A
|
|
TIPit
|
Trust in politicians
(1 = extremely low to 7 =
extremely high)
|
576
|
2.602
|
0.806
|
1
|
6
|
E
|
|
CVLit
|
Civil Liberty (1 = maximum freedom
to 7 =
absence of freedom)
|
968
|
3.761
|
1.347
|
1
|
7
|
F
|
|
PRit
|
Political Rights (1 = maximum
freedom to 7 =
absence of freedom)
|
968
|
3.863
|
1.769
|
1
|
7
|
F
|
Explanation. A = WDI. B = WGI. C = Calculated by the authors using PCA based on five governance indicators / WGI(VAit, PSit, GRit, RQit, RLit). D = Elgin et al. (2021), E = World Economic Forum Global Competitiveness Index. F = Freedom House. Source: Own calculation.
|
|
TRit
|
DTRit
|
IDTRit
|
TTRit
|
GVNit
|
CCit
|
|
TRit
|
1
|
|
|
|
|
|
|
DTRit
|
0.755
|
1
|
|
|
|
|
|
IDTRit
|
0.650
|
0.168
|
1
|
|
|
|
|
TTRit
|
0.494
|
0.295
|
-0.096
|
1
|
|
|
|
GVNit
|
0.352
|
0.354
|
0.191
|
0.123
|
1
|
|
|
CCit
|
0.435
|
0.422
|
0.212
|
0.220
|
0.864
|
1
|
|
LOG_ICAPit
|
0.162
|
0.195
|
0.142
|
-0.086
|
0.409
|
0.297
|
|
INDit
|
0.060
|
0.187
|
0.263
|
0.005
|
0.032
|
-0.039
|
|
INFit
|
-0.018
|
-0.012
|
-0.095
|
0.147
|
-0.100
|
-0.101
|
|
TOPit
|
0.498
|
0.333
|
0.424
|
-0.183
|
0.250
|
0.224
|
|
SHDit
|
-0.062
|
-0.084
|
-0.014
|
-0.067
|
-0.445
|
-0.331
|
|
LOG_POPit
|
-0.471
|
-0.177
|
-0.448
|
-0.247
|
-0.217
|
-0.303
|
|
TIPit
|
0.142
|
0.258
|
0.100
|
0.188
|
0.463
|
0.461
|
|
CVLit
|
-0.331
|
-0.249
|
-0.283
|
-0.068
|
-0.451
|
-0.444
|
|
PRit
|
-0.262
|
-0.230
|
-0.236
|
-0.005
|
-0.387
|
-0.410
|
|
Models
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
(7)
|
(8)
|
(9)
|
(10)
|
(11)
|
(12)
|
|
|
IV + FE
|
IV + FE
|
IV + FE
|
IV + FE
|
IV + FE
|
IV + FE
|
IV + FE
First
|
IV + FE
First
|
IV + FE
First
|
IV + FE
First
|
IV + FE
First
|
IV + FE
First
|
|
D.V.
|
TRit
|
TRit
|
TRit
|
TRit
|
TRit
|
TRit
|
GVNit
|
GVNit
|
GVNit
|
CCit
|
CCit
|
CCit
|
|
GVNitFG G
|
3.843***
|
2.726***
|
2.159*
|
|
|
|
|
|
|
|
|
|
|
(1.215)
|
(0.963)
|
(1.114)
|
|
|
|
|
|
|
|
|
|
|
CCit
|
|
|
|
6.284***
|
4.789***
|
3.231**
|
|
|
|
|
|
|
|
|
|
|
(1.813)
|
(1.620)
|
(1.542)
|
|
|
|
|
|
|
|
CVLit
|
|
|
|
|
|
|
-0.083***
|
-0.116***
|
-0.128***
|
-0.042***
|
-0.055***
|
-0.071***
|
|
|
|
|
|
|
|
(0.027)
|
(0.031)
|
(0.043)
|
(0.015)
|
(0.017)
|
(0.027)
|
|
PRit
|
|
|
|
|
|
|
-0.073***
|
-0.084***
|
-0.031
|
-0.049***
|
-0.052***
|
-0.017
|
|
|
|
|
|
|
|
(0.018)
|
(0.022)
|
(0.023)
|
(0.011)
|
(0.013)
|
(0.015)
|
|
LOG_ICAPit
|
2.307***
|
|
|
2.060***
|
|
|
0.402***
|
|
|
0.207***
|
|
|
|
(0.796)
|
|
|
(0.700)
|
|
|
(0.067)
|
|
|
(0.043)
|
|
|
|
INDit
|
0.146***
|
|
|
0.130***
|
|
|
-0.011***
|
|
|
-0.004**
|
|
|
|
(0.035)
|
|
|
(0.035)
|
|
|
(0.003)
|
|
|
(0.002)
|
|
|
|
INFit
|
-0.002
|
|
|
-0.003
|
|
|
-0.072
|
|
|
-0.164
|
|
|
|
(0.057)
|
|
|
(0.092)
|
|
|
(0.424)
|
|
|
(0.605)
|
|
|
|
TOPit
|
0.063***
|
|
|
0.063***
|
|
|
0.003
|
|
|
0.002
|
|
|
|
(0.009)
|
|
|
(0.009)
|
|
|
(0.009)
|
|
|
(0.006)
|
|
|
|
LOG_POPit
|
-0.322
|
|
|
-0.904
|
|
|
-0.980***
|
|
|
-0.410***
|
|
|
|
(2.144)
|
|
|
(1.856)
|
|
|
(0.192)
|
|
|
(0.100)
|
|
|
|
SHDit
|
|
-0.399***
|
|
|
-0.358***
|
|
|
-0.027**
|
|
|
-0.024***
|
|
|
|
(0.092)
|
|
|
(0.095)
|
|
|
(0.011)
|
|
|
(0.007)
|
|
|
TIPit
|
|
|
0.598**
|
|
|
0.598*
|
|
|
0.104***
|
|
|
0.096***
|
|
|
|
(0.257)
|
|
|
(0.324)
|
|
|
(0.030)
|
|
|
(0.017)
|
|
U.ID(p-val.)
|
|
|
|
|
|
|
0.000
|
0.000
|
0.006
|
0.000
|
0.000
|
0.005
|
|
W.ID (F-stat.)
|
|
|
|
|
|
|
23.194
|
26.484
|
27.160
|
29.742
|
32.775
|
27.377
|
|
Hansen(p-val.)
|
|
|
|
|
|
|
0.678
|
0.382
|
0.310
|
0.500
|
0.287
|
0.314
|
|
Observations
|
968
|
874
|
575
|
968
|
874
|
575
|
968
|
874
|
575
|
968
|
874
|
575
|
|
Countries
|
78
|
75
|
66
|
78
|
75
|
66
|
78
|
75
|
66
|
78
|
75
|
66
|
Explanation. T-statistics based on HAC standard errors are reported in parentheses. Both country and time effects are included. D.V. = Dependent Variables. U.ID = The p-values associated with the Kleibergen-Paap underidentification test. W.ID = The F-statistics associated with the Kleibergen-Paap weak identification test. Hansen = The p-values associated with the Hansen overisdentification test. *, **, and *** denote significance at the 10%, 5%, and 1% levels, respectively. Source: Own calculation.
|
Models
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
(7)
|
(8)
|
(9)
|
(10)
|
(11)
|
(12)
|
|
|
SGMM
One-Step
|
SGMM
Two-Step
|
SGMM
One-Step
|
SGMM
Two-Step
|
SGMM
One-Step
|
SGMM
Two-Step
|
SGMM
One-Step
|
SGMM
Two-Step
|
SGMM
One-Step
|
SGMM
Two-Step
|
SGMM
One-Step
|
SGMM
Two-Step
|
|
TRit
|
TRit
|
TRit
|
TRit
|
TRit
|
TRit
|
TRit
|
TRit
|
TRit
|
TRit
|
TRit
|
TRit
|
|
TRit-1
|
0.788***
|
0.776***
|
0.869***
|
0.932***
|
0.855***
|
0.856***
|
0.823***
|
0.852***
|
0.866***
|
0.940***
|
0.887***
|
0.982***
|
|
(0.098)
|
(0.120)
|
(0.092)
|
(0.094)
|
(0.137)
|
(0.183)
|
(0.081)
|
(0.120)
|
(0.076)
|
(0.085)
|
(0.102)
|
(0.097)
|
|
GVNit
|
1.105**
|
1.251**
|
1.158**
|
1.217**
|
1.102*
|
1.424**
|
|
|
|
|
|
|
|
(0.555)
|
(0.488)
|
(0.583)
|
(0.493)
|
(0.633)
|
(0.720)
|
|
|
|
|
|
|
|
CCit
|
|
|
|
|
|
|
1.457**
|
1.668**
|
1.395*
|
1.174*
|
1.164
|
1.061
|
|
|
|
|
|
|
|
(0.716)
|
(0.789)
|
(0.771)
|
(0.707)
|
(0.822)
|
(0.804)
|
|
GVNit-1
|
1.525***
|
1.328***
|
1.659***
|
1.473***
|
1.513***
|
1.277**
|
|
|
|
|
|
|
|
(0.392)
|
(0.361)
|
(0.411)
|
(0.365)
|
(0.547)
|
(0.551)
|
|
|
|
|
|
|
|
CCit-1
|
|
|
|
|
|
|
1.677**
|
1.211**
|
1.686***
|
1.438**
|
1.617***
|
1.147**
|
|
|
|
|
|
|
|
(0.528)
|
(0.550)
|
(0.571)
|
(0.594)
|
(0.574)
|
(0.581)
|
|
LOG_ICAPit
|
1.069***
|
1.073***
|
|
|
|
|
1.057***
|
1.043***
|
|
|
|
|
|
(0.209)
|
(0.151)
|
|
|
|
|
(0.147)
|
(0.161)
|
|
|
|
|
|
INDit
|
0.222*
|
0.232**
|
|
|
|
|
0.220**
|
0.218*
|
|
|
|
|
|
(0.116)
|
(0.118)
|
|
|
|
|
(0.114)
|
(0.120)
|
|
|
|
|
|
INFit
|
-0.005
|
-0.006
|
|
|
|
|
-0.008
|
-0.007
|
|
|
|
|
|
(0.047)
|
(0.041)
|
|
|
|
|
(0.051)
|
(0.049)
|
|
|
|
|
|
TOPit
|
0.111***
|
0.112***
|
|
|
|
|
0.110***
|
0.112***
|
|
|
|
|
|
(0.019)
|
(0.010)
|
|
|
|
|
(0.018)
|
(0.011)
|
|
|
|
|
|
LOG_POPit
|
-0.136
|
-0.129
|
|
|
|
|
-0.057
|
-0.041
|
|
|
|
|
|
(0.106)
|
(0.107)
|
|
|
|
|
(0.089)
|
(0.107)
|
|
|
|
|
|
SHSit
|
|
|
-0.123***
|
-0.115***
|
|
|
|
|
-0.120**
|
-0.115***
|
|
|
|
|
|
(0.014)
|
(0.014)
|
|
|
|
|
(0.010)
|
(0.010)
|
|
|
|
TIPit
|
|
|
|
|
0.514**
|
0.630**
|
|
|
|
|
0.559***
|
0.644***
|
|
|
|
|
|
(0.232)
|
(0.270)
|
|
|
|
|
(0.180)
|
(0.188)
|
|
AR2 (p-val.)
|
0.726
|
0.727
|
0.588
|
0.592
|
0.292
|
0.303
|
0.738
|
0.717
|
0.595
|
0.602
|
0.296
|
0.307
|
|
Hansen (p-val.)
|
0.791
|
0.791
|
0.593
|
0.593
|
0.541
|
0.541
|
0.330
|
0.330
|
0.264
|
0.264
|
0.614
|
0.614
|
|
Diff. in Hansen (p-val.)
|
0.477
|
0.477
|
0.265
|
0.265
|
0.342
|
0.342
|
0.120
|
0.120
|
0.111
|
0.111
|
0.335
|
0.335
|
|
Instruments
|
32
|
32
|
27
|
27
|
22
|
22
|
32
|
32
|
27
|
27
|
22
|
22
|
|
Observations
|
875
|
875
|
785
|
785
|
544
|
544
|
875
|
875
|
785
|
785
|
544
|
544
|
|
Countries
|
77
|
77
|
75
|
75
|
67
|
67
|
77
|
77
|
75
|
75
|
67
|
67
|
Explanation. HAC and Windmeijer’s (2005) robust standard errors are reported in parentheses on one-step and two-step estimations, respectively. Both country and time effects are included. D.V. = Dependent Variables. U.ID = The p-values associated with the Kleibergen-Paap underidentification test. W.ID = The F-statistics associated with the Kleibergen-Paap weak identification test. Hansen = The p-values associated with the Hansen overidentification test. *, **, and *** denote significance at the 10%, 5%, and 1% levels, respectively. Source: Own calculation.
|
Models
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
(7)
|
(8)
|
(9)
|
(10)
|
(11)
|
(12)
|
(13)
|
(14)
|
(15)
|
(16)
|
(17)
|
(18)
|
|
D.V.
|
DTRit
|
DTRit
|
DTRit
|
DTRit
|
DTRit
|
DTRit
|
IDTRit
|
IDTRit
|
IDTRit
|
IDTRit
|
IDTRit
|
IDTRit
|
TTRit
|
TTRit
|
TTRit
|
TTRit
|
TTRit
|
TTRit
|
|
GVNit
|
0.888*
|
0.789*
|
0.534
|
|
|
|
2.635***
|
1.570***
|
1.251
|
|
|
|
1.010**
|
0.824**
|
0.669
|
|
|
|
|
(0.538)
|
(0.461)
|
(0.697)
|
|
|
|
(0.772)
|
|
