New book edited by Rice economist explores the effects of taxation in developing countries

A new book edited by a Rice University economist explores the challenges faced by developing countries when they try to raise tax revenue to finance basic public services.

“Critical Issues in Taxation and Development” examines a variety of issues essential to understanding the effects of taxes on development.

“Many developing countries find it difficult to raise the revenue required to provide such basic public services as education, health care and infrastructure,” said George Zodrow, the book’s co-editor and a professor of economics at Rice who has worked on tax reform projects in numerous developing countries. “Designing and implementing a tax system is always difficult, but it is even more challenging in developing countries in the face of limited administrative resources, widespread corruption, pervasive tax evasion and tax avoidance and ineffective political structures.”

The book compiles nine research studies by noted economists that examine numerous issues, including the effect of taxation on foreign direct investment; the interactions among government corruption, taxation and development; the taxation of natural resources; and the special problems caused by – and some unique tax tools used to combat – tax evasion and tax avoidance in developing countries. A common theme of these studies is the use of modern empirical techniques to address precisely defined issues in taxation and economic development. The volume includes an overview of current issues in taxation and development by Michael Keen of the International Monetary Fund, who notes a recent resurgence in interest in the subject.

The book also focuses on issues related to political structure, including the negative effects of fiscal decentralization on the effectiveness of developmental aid and the relationship between democracy and taxation in developing countries that have recently experienced both political and economic transitions.

Zodrow said he hopes the book will be utilized by academics and development experts, including those in the various multilateral economic development agencies, policymakers in and out of government and anyone seeking to expand their knowledge of taxation issues and how they impact progress in developing countries.

The book was co-edited by Clemens Fuest, research director of the Oxford University Centre for Business Taxation and professor of business taxation at Oxford’s Said Business School, where Zodrow is an international fellow.

For more information on the book, which was published by MIT Press, visit http://mitpress.mit.edu/books/critical-issues-taxation-and-development.