DETERMINANTS OF TAXABLE CAPACITY IN SAARC COUNTRIES

Abstract

The main objective of this study is to estimate the determinants of taxable capacity of SAARC countries. For measuring the taxable capacity secondary data is gathered from the international country risk guide and World Bank development indicators. For data analysis, a Random effect model has been used.  Important determinants to increase the taxable capacity of SAARC countries are found in this study. Economic factors such as GDP per capita, trade openness and agriculture value-added share have a highly significant impact on the taxable capacity of SAARC countries. The demographic factor-like population growth rate has a significant impact on the taxable capacity of SAARC countries Institutional factors such as control of corruption and bureaucracy quality index have a significant impact on the taxable capacity of SAARC countries. This study helps the SAARC country's policymakers; they can increase the tax revenues of SAARC countries by increasing the GDP, import and export (Trade Openness), bureaucracy quality and control of corruption.