The Determinants of Taxable Capacity: a Bayesian Econometric Approach

One of the important factors for economic development is the existence of an effective tax system. Higher tax revenues are also important to lower the aid dependency of low-income countries. Tax system can influence international investment decisions. They also encourage good governance and they are integral to strengthening state building and promote state accountability. The first step to understand public revenue system is to establish some commonly agreed performance measurement and benchmarks. One of the performance assessment benchmarks of tax system is tax capacity. In this regard in this study we investigated the determinant factors of tax capacity in oil exporter developing countries during 1996-2014 with “Bayesian Model Averaging” method to determine role and importance of any factors in affecting on tax capacity. The study intends to present country tax capacity typologies in order to fulfill emerging needs from developing countries’ policy makers.