Development-Oriented Tax Policy

No public policy issue is of more importance than the structure and level of taxes. Tax reform has led governments to fall. Proposals to extend the VAT or increase its rates have been a source of political agitation in many countries, including Ecuador and Mexico. In many less developed countries, a shortage of funds impedes development efforts, and yet attempts to expand taxation not only meet enormous political resistance, but also often turn out to be futile. Simplistic recommendations to increase the power of the tax police often backfire—generating substantially more revenue for the tax collectors, but not much extra revenue for the public fisc