Fintech and tax revenues: does political institution matter?

Abstract

ABSTRACT The study investigates the effect of fintech on tax revenues while empirically measuring the moderating effects of political institutions. Using the iterated GMM estimator, the study utilises a sample of 24 low and middle-income countries and a dataset spanning 2013 to 2021. The findings indicate that the advancement of fintech considerably benefits tax revenues, meaning that fintech, in the form of technology integration into taxation, can be a valuable tool for efficient tax collection and administration. The research also shows that political institutions positively affect tax revenues, implying that sound political institutions are indispensable for increased tax revenues. Most interestingly, the empirical findings provide evidence of the positive moderating effects of political institutions on the nexus between fintech and tax revenues, which suggests that the improvement in political institutions fosters the significant positive effect of fintech on tax revenues in these countries. The governments and policymakers of these countries can boost tax revenues through, on one hand, fintech development and, on the other hand, solid political institutions that support fintech development.