Determinant of Tax Buoyancy: Empirical Evidence from Developing Countries

Abstract

The purpose of this paper is to find the determinant of tax buoyancy of developing countries. We have used 25 countries cross section data for the year 1998 to 2008 and used pooled least square method for result analysis. The result shows that import, manufacturing sector, services sector, monetization and budget deficit influence positively the tax buoyancy while growth in grants impact negatively on tax buoyancy. The growth of agriculture sector has insignificant impact on tax buoyancy in case of developing countries because they are not taxed or under taxed.