Abstract

AbstractThis paper examines the relationship between tax transition reform, development aid volatility, and public revenue instability in developing countries. Empirical findings show that tax reform exerts a negative effect on tax revenue instability, and the magnitude of this negative effect diminishes as the degree of development aid volatility increases. Specifically, beyond a certain level of development aid volatility, tax reform enhances tax revenue instability. Overall, these findings suggest that higher development aid flows to developing countries should be accompanied by a lower aid volatility so as to ensure that tax reform would generate lower tax revenue instability in recipient countries. © 2019 John Wiley & Sons, Ltd.

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