Page 51 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.74, # 2, 2017, pp. 51 - 63

TAX REVENUES, CORRUPTION AND GOVERNANCE IN OECD COUNTRIES: A
PANEL REGRESSION ANALYSIS

Seda Ozekicioglu

Assistant Professor, Cumhuriyet University
E-mail: [email protected]

Yilmaz Bayar

Associate Professor, Usak University

E-mail: [email protected]

Received 29 September 2017; accepted 15 December 2017; published online 25 December 2017

Abstract

The public sector contributes to the economic growth and economic development through
especially health, education, transportation and information technologies investments. However,
the share of the public sector in overall economy has decreased significantly due to privatization
and tax revenues have become the crucial source of income for making investments. So the
determinants of tax revenues also have gained importance concordantly. In this study, we
research the effect of corruption, government effectiveness, regulatory quality, and rule of law
representing the quality of public administration on the total tax revenues in 35 OECD countries
during the periods 2002-2015 by employing panel regression analysis. The findings revealed that
improvements in corruption, government effectiveness, regulatory quality, and rule of law have
positive effect on tax revenues.

Keywords: Tax revenues, corruption, rule of law, public governance

JEL code: C33, H21, D73

1. Introduction

From the classical economics to market economy, public sector’s size and scope in the economy
have continuously changed. The mentality of social welfare state has changed with the existence
of global commodities and services (climate changes, tax evasion, etc.) and the state as public
sector has resumed its position in the economy. Taxation is the major source of financing
government expenditures to achieve economic growth and development. In this context;
economic and political stability, rule of law, per capita income and tax consciousness are the

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