Tax Revenue Mobilization in Developing Countries: Do We Need More Political Veto Players?

In developing economies with limited resources and tax compliance challenges, we examine how involving multiple veto players within the governance framework influences tax revenue. We performed a dynamic panel model on 104 countries and showed that tax revenue reacts positively to the size of political veto players. Our analysis also reveals a nonlinear effect indicating an optimal balance of veto points. This balance highlights the need for a governance structure that imposes sufficient veto players to prevent the abuse of power or arbitrary decision-making, yet avoids being overly restrictive to the point of hindering the decision-making process.