Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

Internet, Participation in International Trade and Tax Revenue Instability

Version 1 : Received: 17 October 2020 / Approved: 19 October 2020 / Online: 19 October 2020 (14:36:10 CEST)

How to cite: Gnangnon, S.K. Internet, Participation in International Trade and Tax Revenue Instability. Preprints 2020, 2020100385 (doi: 10.20944/preprints202010.0385.v1). Gnangnon, S.K. Internet, Participation in International Trade and Tax Revenue Instability. Preprints 2020, 2020100385 (doi: 10.20944/preprints202010.0385.v1).

Abstract

This paper investigates the effect of the Internet on tax revenue instability, notably through the international trade channel. It has used a sample of 142 countries over the period 1995-2017, and relied primarily on the two-step system Generalized Methods of Moments (GMM) estimators (but also incidentally on the Error Component Two-Stage Least Squares estimator). Tax revenue instability is primarily measured by the instability of non-resource tax revenue, but also by the instability of total tax revenue (for robustness check). The findings indicate that the Internet exerts a negative effect on tax revenue instability. Interestingly, this effect genuinely translates through the international trade channel, regardless of the measure of tax revenue instability considered. Countries enjoy a higher negative effect of the Internet on tax revenue instability as they enjoy a greater participation in international trade. These findings, therefore, add to the potential benefits of the Internet adoption (e.g., strengthening countries' participation in international trade, enhance their tax revenue performance and promote tax reform, including in developing countries) by showing that it could also help to stabilize tax revenue, particularly through the degree of countries' participation in international trade.

Subject Areas

Internet use; Participation in international trade; Tax revenue instability

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