Given that it is relatively harder to tax the agricultural sector, it is expected that as the share of _agriculture value added_ in percentage of GDP increases, collected taxes in percentage of GDP drop due to a smaller tax base (Leuthold, 1991; Tanzi, 1992; Piancastelli, 2001). Thus, the expected sign of the agriculture value added ratio is negative.

Institutional and governance quality is considered as one of the most essential factors determining the adequacy of tax collection (Tanzi and Davoodi, 1997; Ghura, 1998; Bird, et al., 2004; Gupta, 2007). Countries can collect higher taxes only if the tax collection process is efficient. In this regard, _bureaucracy quality_ index and _corruption_ index, which are two possible measures of institutional and governance quality, are expected to have a significant impact on tax collection. The ICRG reports several indicators of institutional and governance quality. In the original database, bureaucracy quality index and corruption index are reported as index numbers from 1 to 6. While “1” indicates the lowest bureaucracy quality or highest corruption, “6” corresponds to the highest bureaucracy quality or lowest corruption. Similar to the case in Le, Moreno-Dodson, and Rojchaichaninthorn (2008), we re-index each of these measures in this paper such that lower numbers indicate a higher bureaucracy quality or lower corruption. Rescaling consists of defining a new range where -10 (least corrupt or best bureaucratic quality) and -1 (most corrupt or worst bureaucratic quality). With this new definition, we expect tax revenues to drop with increasing index values, meaning negative estimated coefficients of these variables.

A simple correlation matrix among these variables indicates the expected signs (see Table A5 in the Annex). Tax revenue is positively correlated with GDP per capita, and trade openness; and negatively correlated with age dependency ratio, population growth, agriculture value added, as well as bureaucracy quality index and corruption index as defined above. When we compare these results with the correlation values reported in Le, Moreno-Dodson, and Rojchaichaninthorn (2008), which covered a shorter time period and a smaller sample of countries, it can be seen that the correlation between tax revenues and all other variables drops; it is especially true for GDP per capita. Given that the ratio of tax revenues as a share of GDP has been increasing, especially in the low-income and middle-income groups (see Figure 1), this lower correlation is expected. The only exceptions are bureaucracy quality index and corruption index; their correlation with tax revenues and total fiscal revenue gets higher. Such changes in the link between actual taxes and macroeconomic variables through time are also expected to change the predicted value of taxes.

Average values of the variables for each country are reported in Table A1 in the Annex, while overall averages and other descriptive statistics are reported in Table A6 in the Annex. When we compare the descriptive statistics reported in Le, Moreno-Dodson, and Rojchaichaninthorn (2008) to the new results obtained with an extended dataset from 1994 to 2009, it can be seen that tax revenues increased by 1.5 percentage points on average; total fiscal revenues increased by 1 percentage point; trade openness increased by 4 percentage points; population grew 0.4 percentage point higher; agriculture values added became lower by 3 percentage points; and both 10