Recent work draws attention to the fragility of domestic tax revenues—a vital resource for the developing world—to illicit financial flows. To cope with two major challenges in the illicit financial flows–tax revenues relationship—related to the mere illicit financial flows measurement and reverse causality—this paper exploits the Financial Action Task Force data using an impact assessment analysis. Estimations reveal a significant tax revenue loss in countries associated with important illicit financial flows with respect to comparable countries without important illicit financial flows. Moreover, this causal effect—estimated as being economically meaningful—is supported by a large robustness section, and in particular remains unchanged when using several “doubly robust” estimators. Lastly, it unveils heterogeneities in the impact of illicit financial flows on tax revenues, related to the type of tax—a significant loss for indirect but not for direct taxes—and the considered environment. Therefore, policies combating illicit financial flows—for example, by developing institutions or a sound financial system, as shown by the estimations—may provide additional tax revenues for the developing world.
Details
-
Author
Combes,Jean-Louis, Minea,Alexandru, Sawadogo,Pegdewende Nestor
-
Document Date
2021/09/23
-
Document Type
Policy Research Working Paper
-
Report Number
WPS9781
-
Volume No
1
-
Total Volume(s)
1
-
Country
-
Region
-
Disclosure Date
2021/09/23
-
Disclosure Status
Disclosed
-
Doc Name
Do Illicit Financial Flows Hurt Tax Revenues ? Evidence from the Developing World
-
Keywords
tax revenue; Combating the Financing of Terrorism; real value of tax revenue; Goods and Service Tax; determinants of tax revenue; real rate of return; weapons of mass destruction; loss of tax revenue; Financial Action Task Force; illicit financial flows; domestic tax revenue; value added tax; propensity score matching; standard error; low tax revenues; illicit money flow; department of economics; financing of investment; allocation of resource; international financial system; domestic regulatory framework; international political economy; high inflation rate; average of tax; domestic revenue mobilization; sound financial system; direct tax revenue; public sector indebtedness; global financial system; effect of trade; high inflation episode; international standard; standard deviation; matching method
- See More
Downloads
COMPLETE REPORT
Official version of document (may contain signatures, etc)
- Official PDF
- TXT*
- Total Downloads** :
- Download Stats
-
*The text version is uncorrected OCR text and is included solely to benefit users with slow connectivity.
Citation
Combes,Jean-Louis Minea,Alexandru Sawadogo,Pegdewende Nestor
Do Illicit Financial Flows Hurt Tax Revenues Evidence from the Developing World (English). Policy Research working paper,no. WPS 9781,Impact Evaluation series Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/920391632411569911/Do-Illicit-Financial-Flows-Hurt-Tax-Revenues-Evidence-from-the-Developing-World