The Mirrlees review: tax by design? Lessons for middle icnome economies and the case of Turkey

Available from: 
October 2013
Paper author(s): 
David Phillips (Institute for Fiscal Studies)
Laura Abramovsky (Institute for Fiscal Studies)
Paul Johnson (Institute for Fiscal Studies)
Topic: 
Fiscal Policy - Public and Welfare Economics
Year: 
2013


The structure of the tax system plays a crucial role in determining the size of the costs associated with revenue-raising, and, hence, the ability of governments’ to fund services and redistribute effectively. In this paper we set out some principles for thinking about what makes a good tax system and sound tax reforms in middle income countries, drawing on the findings of the Mirrlees Review. We argue that the Review’s three guiding principles – that a tax system should work together well as a whole to be progressive and neutral across economic activities (except where there are good reasons to deviate from neutrality) – are likely to be even more important in the context of a middle income country. In particular, relatively weaker tax administration systems and greater opportunities for tax evasion in the pervasive informal economy mean that it is even more important to avoid complex systems that through poor design and non-neutralities give many opportunities for tax avoidance and evasion. However, a paucity of empirical work on the distributional and behavioural effects of taxes in middle income countries mean there is a real need for research before concrete conclusions on how to reform tax systems can be drawn.

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Research section: 
Lacea 2013 annual meeting
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