Reducing Tax Evasion in Developing Countries 1/

Posted by Carlos Scartascini 

Tax evasion is endemic in many countries. In particular, some developing countries do not collect even half of what they should if taxpayers complied with the written letter of the law.2/ In these countries, enforcement mechanisms are weak, tax-collecting authorities are held in low esteem, and courts may not enforce the rules. This problem is sometimes compounded at the local level because the capacity to enforce the law is even lower. As local governments are given more and more expenditure responsibilities and central governments struggle to finance the budget, the need to increase revenues becomes more pressing for subnational authorities.