Effect of the Complexity of the Customs Tax System on the Tax Effort

Jazmín González Aguirre,Alberto Del Villar

doi:10.3390/economies10030055

Abstract

This paper empirically analyses the effects of the tax complexity and other elements, such as natural resource revenues, public expenditure, and the capacity of the statistical system, on the efficiency of Ecuadorian Customs Administration. For this purpose, the methodology used consists of modeling a stochastic production frontier whose estimation procedure is based on the maximum likelihood method for a data panel composed of six countries: Bolivia, Chile, Colombia, Ecuador, Peru, and Panama for the period from 2006 to 2017. The results of the study show that the countries whose tax system has a lower degree of complexity present a better level of revenue collected and tax effort as well as an improvement in the quality and dissemination of national statistical data. Furthermore, this paper provides evidence that the tax effort tends to decrease when the price of crude oil is on the rise.

Highlights

Tax collection is a matter of concern to public managers
In Latin America and the Caribbean, the economic development strategy has been strongly linked to international trade with the application of a series of trade policies considered fundamental in order to compete in a globalized context
Following the strategy of Pessino and Fenochietto (2013), the efficiency of the Customs Administration was determined in the form of the tax effort, which was measured as the relationship between the actual tax collection and the tax capacity

Summary

Introduction

There is an acceptable tax level that allows one to achieve a high level of tax collection and does not discourage economic activity. Setting tax rates in such a way as to allow the maximum tax collection and the minimum loss of economic activity is something that almost all public managers pursue. In this sense, the effect that tax policy has on a country’s economic development is crucial, and it is not free from controversy. In Latin America and the Caribbean, the economic development strategy has been strongly linked to international trade with the application of a series of trade policies considered fundamental in order to compete in a globalized context. The number of treaties and trade agreements confirms this; for example, Chile is the country with the highest number of trade treaties in the region, followed by Peru and Mexico (WTO 2019)

Methods

Results

Conclusion