The determinants of tax revenue in Southeast Asia: The role of government effectiveness and human development

Abstract

Purpose: This study examines the determinants of tax revenue in Southeast Asia, focusing on the impact of human development and government effectiveness on tax revenue.

Methodology: The panel data method, specifically the fixed effects and random effects models, was employed to examine the determinants of tax revenue. The study used data (1992 to 2022) from eight Southeast Asian countries retrieved from the World Bank’s World Development Indicators and the International Monetary Fund online database.

Findings: This study reveals a positive relationship between human development and tax revenue and government effectiveness and tax revenue.

Implications: The results of this study carry important implications for policymakers. They suggest that enhancing government effectiveness and human development, which encompasses income, health, and education, can lead to an increase in tax revenue. Policymakers are therefore encouraged to prioritize the implementation of policies that bolster government effectiveness, such as the use of modern technology in tax administration, and economic policies that not only boost income but also improve health and education outcomes.

Originality: This study contributes to the existing literature by providing evidence on the relationship between tax revenue and key policy variables. Moreover, it has tested data sets and variables that differ from those used in previous panel data analyses.

Limitations and directions for future research: This study provides valuable evidence on various factors that affect tax revenue. However, based on data availability, other policy variables, such as the quality of tax administration, tax exemption, and incentives, should be included to explore their impact on tax revenue.