Citation:

Sama Yong Francis, Jumbo Urie Eleazar, Visemih William Muffee. "Effects of Tax Revenue Mobilization on Population Well-being in Developing Countries: Exploring the Direct and Indirect Effects" International Research Journal of Economics and Management Studies, Vol. 3, No. 5, pp. 165-176, 2024.

Abstract:

This study aimed to investigate the direct and indirect effect of tax revenue mobilization on population well-being in developing countries. Specifically, the study examined the direct effect of tax revenue mobilization and the indirect effect on population well-being. The study used unbalanced panel data obtained from 100 developing countries, which spans from 2002 to 2021. A two-step System Generalized Method of Moment (SGMM) was used to measure the coefficients of the parameters. The findings indicated that tax revenue mobilization significantly enhances population well-being (life expectancy) by 0.702 points, significant at 1%. Finally, the results showed that tax revenue interacts with IFFs to produce negative direct effects and positive indirect effects when total tax revenues and taxes on international trade are considered. These opposing signs produce positive net effects of tax revenue on well-being. These positive net effects are nullified at IFFs thresholds of 4.932 and 4.1651 points, respectively, for total tax revenue and taxes on international trade. Equally, direct taxes from trade interact with IFFs, producing positive direct effects and negative indirect effects, leading to positive net effects on population well-being. The threshold for IFFs required to nullify this positive net effect is 9.05319 points. To account for the endogeneity problem, the moderating multiply regression estimation technique was used. Based on these findings, the policy recommendations are that, in as much as optimizing tax revenue collection is important for the population well-being of developing economies, these economies should put in place mechanisms to increase domestic revenue. To increase domestic resource mobilization. The study also recommends that governments should implement a moral approach when collecting taxes because the disrespectful treatment of taxpayers undermines their morals and can cause an increase cost of tax collection. Procedures used by tax auditors in their contracts with taxpayers should be made transparent and clear. Again, taxpayers should be treated as partners in a psychological tax contract and not as inferiors in a hierarchical relationship. This will give the taxpayer the incentive to pay taxes honestly without feeling the tax burden. Then, the cost of tax collection will be reduced, and the plundering of state revenue through IFFs will also be reduced.

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Keywords:

Direct and Indirect Effects, Tax, Revenue.