Tax regimes and the quality of governance: an empirical inquiry across developed and developing countries

This study examines the effects of taxation on the level of corruption using a panel data for 217 countries and territories during 1984–2023. The effects are also estimated based on economic categorization of countries both at the aggregated and disaggregated tax levels. The findings suggest that an imposition of tax proliferates corruption level in a country by incentivizing tax evasion, and the effect varies across the level of development. Moreover, different forms of taxation affect corruption in different ways. Overall, labor tax deducting from profit increases corruption unambiguously; however, income and export taxes observe some opposite effects across the level of development.