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One common feature of the current literature on corruption, especially the empirical contributions to it, is the emphasis on the exogenous determinants of corruption, which are generally beyond the direct control of governments. To date, little is known about how the design of government policy potentially affects the level of corruption in a country, even though there is growing recognition that the design and administration of tax and spending policies play important roles in promoting or discouraging corrupt practices. Using a large sample of countries over the 1995-2009 period, this paper fills the gap by conducting the first analysis in the literature to examine the significance of the tax structure, as measured by both tax mix and tax complexity, in determining corruption. Our results suggest the following: (1) countries relying more heavily on direct taxes tend to exhibit less corruption than countries that rely more heavily on indirect taxes, and (2) countries with more complex tax systems tend to be more corrupt than countries with less complex tax systems. These results are robust across alternative measures of corruption and tax structure and alternative estimations with and without correcting the potential endogeneity issue of the tax structure variables. Adapted from the source document.

China enacted a rural tax reform -- the 'Tax-for-Fee Reform' (TFR) -- in the late 1990s. A crucial but unanswered question is whether this reform improved farmers' welfare in rural areas. This article uses village-level survey data from the Chinese Household Income Project in order to examine the effect of the TFR on farmers' direct and indirect welfare. We find no evidence that the direct welfare effects improved farmers' net income. In contrast, the reform appears to have reduced the villages' financing capacity, and hence to have lowered their overall expenditures. These indirect effects have had significant negative impacts on farmers' welfare. Adapted from the source document.

AbstractUsing a structural model and a large panel dataset for 150 developed and developing countries covering the period 1970–2009, the present paper examines the potential tradeoff between economic growth and income inequality in the design of tax structure. We find clear evidence of: (i) a tradeoff between growth and inequality for both direct and indirect taxes; (ii) heterogeneous growth and inequality effects of tax instruments measured by levels and rates (particularly corporate income tax); and (iii) heterogeneous effects of tax instruments on different definitions of inequality (i.e. gross income, net income or expenditure).