Stochastic semi-nonparametric frontier approach fortax administration efficiency measure:

Evidence from a cross-country study

Resume :

SummaryThis article discusses the measurement of tax administration efficiency across 44 countries
using advanced frontier estimators. The study aims to shed light on tax administration efficiency in
terms of cost usage and enforcement, and considers the impact of contextual variables. The results
show that tax agencies in these countries could have increased tax revenue by about 58.7% and 34.2%
for two periods, respectively. The study contributes to the existing research field by using innovative
estimators and comparative data from the OECD tax administration database.

Example questions:

 How did the study measure tax administration efficiency across different countries?
 What were the findings regarding the potential increase in tax revenue for the studied
countries?
 How does this study contribute to the existing research on tax administration efficiency?

Review :

1 . What is the problem phenomenon in this research article? and explain!

Answer :

The problem phenomenon in this research article is the inefficiency of tax

administration agencies in various countries. The study aims to measure the efficiency of tax
agencies in terms of cost usage and enforcement and to identify potential improvements in tax
agency efficiency. The inefficiency is highlighted by the finding that tax agencies in the countries
studied could have increased tax revenue by a significant percentage over two periods while
maintaining the current level of input usage. This inefficiency has implications for tax revenue
collection and the overall effectiveness of tax administration, making it a critical problem to
address. The study seeks to shed light on this issue and provide insights into optimizing tax
administration efficiency.

2 . What is the research objective of this article?

Answer :

The research objective of this article is to measure the efficiency of tax administration agencies
across 44 countries using advanced frontier estimators and to identify potential improvements
in tax agency efficiency. The study aims to shed light on tax administration efficiency in terms of
cost usage and enforcement, and considers the impact of contextual variables. Additionally, the
article aims to optimize tax administration efficiency by maximizing revenue for tax system
general operations and to provide insights into the best practices for benchmark regulation and
the management of tax offices.

3 . Mention or define the variables and their types in this article!

Answer :

The research article utilizes various variables and their types to measure tax agency
efficiency. These variables include tax agency resources and operational performance extracted
from the OECD Tax Administration database. Contextual variables such as trade openness,
value added of agriculture, value added of service, public debt, and total tax rate are retrieved
from published sources such as The World Bank and IMF. Additionally, the article employs
environmental or contextual variables to account for the operating environment in which the
production takes place. To eliminate multicollinearity among the contextual variables, the study
uses a multivariate descriptive technique, factor analysis, to attain two factors representing
around 70% of the variability of these variables. The research also employs the StoNEZD
approach and conducts a robustness check using the conditional order-m efficiency method to
measure performance of tax agencies to the extent of general operation.

These variables and their types are crucial in understanding the factors that impact tax
agency efficiency and in measuring the performance of tax agencies in different countries.

T.T.T. Nguyen, D. Prior and S. Van Hemmen / Economic Analysis and Policy 66 (2020) 137–153
4 . Determine which are the independent, dependent, moderating and mediating variables

Answer :

The independent variables in this research article are the tax agency resources and
operational performance, as well as the contextual variables such as trade openness, value
added of agriculture, value added of service, and public debt. These independent variables are
used to measure the efficiency of tax administration agencies.

The dependent variable is the efficiency of tax agencies, which is measured in terms of
cost usage and enforcement.

The moderating variables are the environmental or contextual variables, which are used
to account for the operating environment in which the production takes place.

There are no explicit mediating variables mentioned in the article. T.T.T. Nguyen, D.
Prior and S. Van Hemmen / Economic Analysis and Policy 66 (2020) 137–153

5 . What are the measurement indicators for each variable?

Answer :

The measurement indicators for each variable are as follows:

1. Tax agency resources and operational performance: These are extracted from the OECD
Tax Administration database and include variables such as salary cost, IT cost, and tax
full-time equivalent (FTE) employees.
2. Contextual variables: These include trade openness, value added of agriculture, value
added of service, and public debt, which are retrieved from published sources such as
The World Bank and IMF.
3. Efficiency of tax agencies: This is measured in terms of cost usage and enforcement, and
is the dependent variable in the study.
 4. Environmental or contextual variables: These are used to account for the operating
environment in which the production takes place and are factorized to attain two
factors representing around 70% of the variability of these variables.

These measurement indicators are crucial in understanding the factors that impact tax agency
efficiency and in measuring the performance of tax agencies in different countries.

6 . Mention the theories used and discussed in this research article? and explain!

Answer :

The research article discusses and applies several theories related to tax agency
efficiency. These include the StoNEZD approach and conditional order-m efficiency method for
estimating the performance of tax agencies across countries. The StoNEZD approach is an
innovative estimator used to measure tax agency performance, and it is employed in this study
to provide insights into the efficiency of tax administration agencies across different countries.
This approach is used to measure the efficiency of tax agencies in terms of cost usage and
enforcement, and it is a significant contribution to the existing research field.

Additionally, the article refers to the literature on efficiency encountering

environmental variables, which includes the latent class SFA proposed and developed by
Greene (2005) and Orea and Kumbhakar (2004). While the study does not employ this
approach due to sample limitations, it acknowledges the relevance of these theories in the
context of efficiency measurement.

The article also briefly reviews the related literature on efficiency in tax administration,
providing a theoretical background for the empirical estimation methodology used in the study.
This theoretical background helps to contextualize the research within the existing body of
knowledge on tax agency efficiency.
 Overall, the article draws on various theories and methodologies to measure tax agency
efficiency and contributes to the existing research field by applying innovative estimators and
empirical methods to address the performance of tax agencies across countries.

7 . What type of research is this, qualitative or quantitative?

Answer :

This research is quantitative in nature. It employs advanced frontier estimators and empirical
methods to measure the efficiency of tax administration agencies across different countries,
using data from the OECD Tax Administration database and contextual variables from published
sources such as The World Bank and IMF.

8 . explain the population and sample in this research! and what is the sample testing method?

Answer :

The research focuses on a sample of 44 countries, primarily belonging to high and

upper-middle-income groups. The sample includes countries such as Brazil, Switzerland,
Colombia, Lithuania, Luxembourg, Portugal, Romania, Sweden, and the USA, among others. The
sample is drawn from the OECD Tax Administration database and other published sources such
as The World Bank and IMF.

The sample testing method employed in the research is the StoNEZD approach, which is
a one-stage estimation method used to measure the efficiency of tax agencies in terms of cost
usage and enforcement. Additionally, the study conducts a robustness check using the
conditional order-m efficiency method to validate the estimations and ensure the reliability of
the findings.

The limitations of the sample are acknowledged in the research, including the
inconsistency of variables across countries, the lack of standard treatment of countries (federal
versus unitary), and the lack of data to control for variety in tax base magnitude and tax rate
among the different countries in the sample. Despite these limitations, the sample represents
the best currently available information on comparable administrative performance and is used
to examine tax agencies' efficiency.

9 . describe and explain the framework for this research

Answer :

The research framework for this study on tax agency efficiency involves the application
of advanced frontier estimators and empirical methods to measure the performance of tax
administration agencies across different countries. The study utilizes the StoNEZD approach, a
one-stage estimation method, to measure the efficiency of tax agencies in terms of cost usage
and enforcement. Additionally, the research employs the conditional order-m efficiency
method as a robustness check to support the validity of the inferences generated from the
StoNEZD estimator and as an alternative to a major estimation inference tool.

The framework also acknowledges the limitations of the sample, including the
inconsistency of variables across countries, the lack of standard treatment of countries (federal
versus unitary), and the lack of data to control for variety in tax base magnitude and tax rate
among the different countries in the sample. Despite these limitations, the sample represents
the best currently available information on comparable administrative performance and is used
to examine tax agencies' efficiency.

The study also discusses the theoretical background for the empirical estimation
methodology used, drawing on various theories and methodologies to measure tax agency
efficiency and contributing to the existing research field by applying innovative estimators and
empirical methods to address the performance of tax agencies across countries.

Overall, the framework for this research involves the application of advanced
estimators, empirical methods, and theoretical background to measure tax agency efficiency
and contribute to the existing body of knowledge on tax administration.
10 . What is the hypothesis in this research?

Answer :

The research article does not explicitly state a hypothesis. However, the study aims to measure
the efficiency of tax administration agencies across different countries using advanced frontier
estimators and empirical methods. The research also seeks to contribute to the existing body of
knowledge on tax agency efficiency by applying innovative estimators and empirical methods to
address the performance of tax agencies across countries.

11 . what are the research results or findings in this research article

Answer :

The research findings in this article indicate that tax agencies in the studied countries could
have increased tax revenue by about 58.7% and 34.2% for the periods 2008–2011 and 2012–
2015, respectively. The study also suggests that the latter period (2012–2015) shows a higher
level of efficiency than the former period (2008–2011), as justified by both estimators.
Additionally, the research results show that the composite error term can be principally caused
by inefficiency, indicating that there is room for improvement in tax administration efficiency in
the studied countries.

13 . explain fully and concisely the conclusions in this article

Jawab :

The research article concludes that tax agencies in the studied countries could have
increased tax revenue significantly over two periods, indicating potential inefficiencies in tax
administration. The study contributes to the existing research field by using advanced
estimators and comparative data from the OECD tax administration database. It also highlights
the importance of tax administration in enforcing tax rules and optimizing efficiency to
maximize revenue for tax system general operations. The findings provide insights into the best
practices for benchmark regulation and the management of tax offices, and the study suggests
potential improvements in tax agency efficiency. However, the article acknowledges the
limitations of the research sample and the need for further investigation into tax administration
efficiency.