Page 60 - Azerbaijan State University of Economics

Seda Ozekicioglu, Yilmaz Bayar: Tax revenues, corruption and governance in OECD
countries: a panel regression analysis

institutions and regulations exhibit importance for operation of the economy. Our findings
verified the theoretical considerations and discovered that the functioning of public
administration and the quality of relevant legislative regulations especially rule of law and
regulatory quality had significant impact on tax collection.

4.5. Results of Panel Regression Assumptions’ Tests

The autocorrelation and heteroscedasticity problems which are major assumptions behind the
regression were tested for the reliability of the results. First, Wooldridge (2002) autocorrelation
test was employed to investigate the autocorrelation problem and the test results were displayed
in Table 8. The null hypothesis was accepted and we revealed that there was no autocorrelation
problem in our model.

Table 8: Results of Woolridge Autocorrelation Test

F value P value
569,033 0,182

The heteroskedasticity problem was examined the test of Greene (2003) and the results were
presented in Table 9. The results discovered that the null hypothesis (no heteroskedasticity) was
accepted.

Table 9: Results of Greene Heteroskedasticity Test

chi2 (2) = 673,284
Prob>chi2 = 0,129

5. Conclusion and Recommendations

Tax revenues have become the crucial source of income for the funding of governments’ current
expenditures and capital expenditures (investments). On the other hand, many countries have
decreased the share of public sector in the economy through privatization. In this study, we
analyzed the effect of corruption and different indicators of public administration on the tax
revenues in 35 OECD countries during the 2002-2015 periods by employing panel regression
analysis. The findings discovered that improvements in corruption, government effectiveness,
regulatory quality, and rule of law have positive effect on tax revenues.

Our findings were found to be consistent with the theoretical considerations and the relevant
empirical literature. So, the functioning of public administration and the quality of relevant
legislative regulations especially rule of law and regulatory quality are very important for tax
collection and in turn decrease the size of shadow economy.

We have some recommendations to decrease corruption level and increase quality of
governance. Primarily, as mentioned in the literature review, government should develop an
effective tax mechanism in order to support regulatory quality. Here, Ministry of Finance carries
a significant role. The Ministry should minimize tax amnesty in order to increase tax

60