Ch 15 - Taxation and development

Question 1

What are 3 sources the gov could finance expenditure from?

Answer 1

Taxation
Int aid
Natural resources

Question 2

What is tax evasion?

Answer 2

Behavioral response to tax where real income is unchanged yet individuals choose to report a lower level of income

Question 3

Although _______ tax rates do not seem radically different across developed and developing countries, _____ tax rates vary substantially

Answer 3

Statutory, effective

Question 4

There’s a _______ correlation between tax revenue as a fraction of GDP and the level of GDP per capita

Answer 4

Positive

Question 5

Developing countries tend to rely more on __________ taxes, whereas developed countries tend to rely more on ________ taxes

Answer 5

Corporate income, consumption, production taxes, tariffs and seignorage
Income taxes

Question 6

What is a exemption threshold?

Answer 6

A level below which individuals pay no taxes

Question 7

Why are tax structures so different?

Answer 7

Developing countries have a lower preference for income redistribution
Developing countries may be choosing suboptimal tax structures
Information and enforcement constraints

Question 8

In developing countries the share of self reported income is much _____ than in developed countries

Answer 8

Higher

Question 9

Why do some firms remain informal?

Answer 9

Cost of formality > benefits
Burdensome entry regulations
Poor financial institutions

Question 10

What factors affect gov investment decisions in fiscal capacity?

Answer 10

Legal environment
Existence of common interest or an urgent need for public spending
Political constraints on redistributive policies nd stability of governments (political turnover)
Presence of non tax revenue

Question 11

What is informal taxation?

Answer 11

Individuals from rural communities often contribute to the provision of public goods in the forms of monetary payments and free labor