Corruption and Tax Revenues: New Evidence from Some Developing Countries

Corruption usually harms all aspects of macroeconomic performances of all countries around the World especially the developing world. The purpose of the present paper is to investigate the impact of corruption on government tax revenues in developing countries. To do so, we have concentrated on a sample of 27 developing countries for which the necessary data were available for the period 2002-2006.We have also used a composite index of corruption called Corruption Perception Index (CPI). CPI varies from zero (highest level of corruption) and 10( lowest level of corruption) Our findings based on panel data regression models indicate that in general a positive relationship between CPI and tax revenues exists and it is statistically significant coefficient in the (TAX/GDP) equation. In other words, the higher is the corruption the lower will be the tax ratios. Therefore, developing countries implementing tax reforms aimed at improving the tax system in their countries must necessarily take into account the corruption phenomenon and at the same time try to use policies reducing corruption