The Heterogeneous Effect of Corruption on Tax Revenue in Developing Countries: The Moderating Role of Administrative Burden of Tax Compliance

This study investigates the heterogeneous effects of corruption on tax revenue and examines the moderating effect of administrative burden of tax compliance with the government in developing countries under corruption and at the same time desperately needing to increase public revenue. We use panel data from 56 developing countries from 1996 to 2021 for our empirical analysis, where we utilized quantile regression in order to identify differences in the distribution and the method of moments quantile regression for robustness. Our results indicate corruption has a non-linear effect on tax revenue, where corruption appears to be positively associated with tax revenue in low tax revenue countries and negatively associated with tax revenue in high tax revenue countries. Furthermore, administrative burden of tax compliance plays a crucial moderating role, amplifying the positive relationship between corruption and tax revenue in low-revenue countries and mitigating the negative relationship in high-revenue countries. These results highlight the importance of institutional quality and tax administration in shaping the fiscal outcomes of corruption across different contexts. JEL Classification: H20, H83, O23, C21.