1. Introduction The history of human development has shown that taxes are essential, as they are related to the

3. Methodology
3.1. Model specification
Castro and Camarillo (2014) fully explored the impacts of economic, structural, institutional, and
social factors on tax revenue in 34 OECD countries in 2001–2011. Following the model in Castro and
Camarillo (2014) and other studies, we propose the following static and dynamic regression models.
3.1.1. Static regression model
TAXREVit ¼ α þ β1�GDPPCit þ β2�TRADEit þ β3�FDIit þ β4�ARGit þ β5�IDNit þ β6�POLRIGit
þ β7�CIVLIBit þ β8�SCHTERit þ β9�LIFEEXPit þ β10�INFMORit þ β11�EXDEBTit

þ β12�ODAit þ β13�INFit þ Tt þ ci þ εit 3.1.2. Dynamic regression model TAXREVit ¼ α þ β0�TAXREVit 1 þ β1�GDPPCit þ β2�TRADEit þ β3�FDIit þ β4�ARGit þ β5�IDNit þβ6�POLRIGit þ β7�CIVLIBit þ β8�SCHTERit þ β9�LIFEEXPit þ β10�INFMORit	(1)
(2)

þ β11�EXDEBTit þ β12�ODAit þ β13�INFit þ Tt þ ci þ εit
where α, βk (k = 0, . . .,13) is the vector of coefficients to estimate.
i is the country (i = 1, . . .,8 is for the eight ASEAN countries).
Minh Ha et al., Cogent Economics & Finance (2022), 10: 2026660
https://doi.org/10.1080/23322039.2022.2026660
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t is the year (t = 1, . . .,17 is for the 17 years from 2000 to 2016).
ci is unobservable individual effects, specific to each country.
Tt is the time dummy.
TAXREV (tax revenue) is the most important concept in this research and is the dependent
variable in the model. TAXREV (%) is measured by the ratio of total tax revenue to GDP. Data for
this variable was obtained from the World Bank WDI.
TAXREVt-1 is a lagged dependent variable. It represents the potential impact of past tax revenue on
current tax revenue. This variable may have a positive effect on the dependent variable because high
tax revenue in the past will stimulate public spending and lead to higher economic growth and thus
increase current tax revenue. However, according to neoclassical growth theory, high tax rates can
prevent economic activities, and thus it has negative effects on tax revenue (Castro & Camarillo, 2014).
GDPPC, measured by the growth rate of GDP per capita, represents a country’s level of economic
development. We expect this variable to have positive impacts on tax revenue. This is because when
a country has higher economic growth, the government will have a greater ability to collect taxes.
GDPPC is widely used in many papers (see, Chelliah, 1971; Eltony, 2002; Gupta, 2007; Piancastelli,
Stotsky & WoldeMariam, 1997; Tanzi, 1992). The data can be collected from the WDI.
TRADE is trade volume measured as the sum of exports and imports as a percentage of GDP.
Taxes on international trade activities are among the most important sources of tax revenue in
many countries. When a country opens up to international trade, it will be exposed to many
external influences, so its government might increase protection of domestic production through
measures such as raising taxes or applying quotas (Rodrik, 1998). Therefore, we expect trade
openness to have a positive impact on tax revenue. This data is collected from the World Bank.
FDI is foreign direct investment, one of the important sources of capital in many developing
countries. FDI contributes to job creation, technology transfer, economic growth, and sustainable
development. FDI inflows have the potential to affect tax revenue, but their impact is not clear, as
they depend on the policy of the host country. If the recipient country has preferential policies to
attract FDI, including tax incentives, FDI inflows are expected to have a negative impact on tax
revenue (Cassou, 1997; Castro & Camarillo, 2014; Martín-Mayoral & Uribe, 2010). However, FDI can
promote national competitiveness and increase the country’s tax revenue (Gugler & Brunner,
2007). The FDI variable is calculated by the contribution of net FDI inflows to GDP (% of GDP).
FDI data can be obtained from the WDI.
ARG is the proportion of value added in agriculture (%). The data come from the World Bank.
Most agricultural activities are small in scale, and the products are sold in informal markets, so it is
difficult to collect taxes (Stotsky & WoldeMariam, 1997). In addition, countries often have create
incentives in agriculture, such as not taxing agricultural products or reducing taxes to a minimum
level (Castro & Camarillo, 2014; Gupta, 2007). Therefore, the proportion of the agricultural sector is
expected to have a negative effect on tax revenue.
IND is the proportion of value added in manufacturing (%). This data comes from the World
Bank. In contrast to agriculture, manufacturing is highly specialized and dynamic, with large
businesses that can generate huge profits. Thus, the government can collect more direct taxes
through corporate income tax and indirect taxes through sales tax and special consumption taxes
Minh Ha et al., Cogent Economics & Finance (2022), 10: 2026660