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Exploring the Relationships between corruption and tax revenue

A review of literature indicates that corruption has a significant negative impact on the levels of tax revenue collected in a country. The current understanding of the correlation between corruption and tax revenue however is incomplete since there is insufficient information available on the impact of taxation on corruption. Corruption not only lowers the tax-GDP ratio but also causes long-term damage to the economy by detracting investment, increasing the size of the underground economy, distorting tax structures and corroding the tax morality of taxpayers. All of these in turn further reduces the long term revenue generating potential of the economy. The impact of taxation on corruption is less explored in the existing research literature. The little information that was found indicates that higher tax rates can induce more corruption in an economy by incentivising tax evasion. It is recommended that more imperical research is carried out to better understand the impacts o

12 January 2010
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Exploring the Relationships between corruption and tax revenue

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Nawaz, F. (2010) Bergen: U4 Anti-Corruption Resource Centre, Chr. Michelsen Institute (U4 Helpdesk Answer null)

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Farzana Nawaz


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