Tax Inspections and Tax Administration Obstacle Reported in Developing Economies

Abstract

By analyzing data from the World Bank, the study first examines the impact of tax inspections or visits on tax administration obstacles reported by firms. The results show that firms that reported tax visits by tax officials are more likely to reply with tax administration obstacles. The results provide evidence that the more the tax inspections or visits, the higher the probability that firms will reply with major or severe tax administration obstacles. The results also show that firms with government ownership are less likely to reply with severe tax administration obstacles. In addition, the results provide evidence that firms operating in higher GDP per Capita economies and/or firms operating in transition economies have a higher probability of replying with severe tax administration obstacles. When the countries examined are categorized into different groups, tax visits/inspections of tax officials are significant in all country groups. The study would be beneficial in helping policy makers and/or tax authorities to alleviate a firm’s stress or obstacles related with tax administration.