ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Indexing the Effectiveness of Tax Administration

The capacity of the tax administration needs to be continuously augmented to keep pace with the changing requirements of tax policy. One of the key challenges in this respect is to measure the effectiveness of the tax administration. This paper develops an econometric model for indexing the effectiveness of tax administration by using the principal component method to remove the feedback effect between voluntary and enforced compliance. This model shows that there has not been a large change in the effectiveness of the direct tax administration in the country over a period of time, despite the fact that there has been a substantial increase in the quantum of direct tax revenue, particularly over the last few years. This calls for attention to strengthen the tax administration.
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