Financial development and tax evasion: International evidence from OECD and non-OECD countries

Amir Allam*, Heba Abou-El-Sood , Mahmoud Elmarzouky, Ahmed Yamen

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

This study investigates the nexus between financial development and tax evasion across 156 countries from 2000 to 2017. In contrast to previous research focusing solely on banks or financial markets’ development, we employ a more comprehensive financial development index introduced by the International Monetary Fund (IMF) in 2016. This index gauges the progress of financial institutions (FI) and financial markets (FM) in terms of depth, access, and efficiency. Our findings underscore a negative correlation between financial development and tax evasion. Enhanced depth, access, and efficiency in both FI and FM correspond to reduced levels of tax evasion. Nevertheless, disparities emerge between the Organization of Economic Cooperation and Development (OECD) and non-OECD countries. While non-OECD countries exhibit negative associations between FI and FM development and tax evasion, in OECD countries, the role of FI assumes greater significance in curtailing tax evasion. Notably, within OECD countries, the depth
Original languageEnglish
Article number100653
Number of pages13
JournalJournal of International Accounting, Auditing and Taxation
Volume57
Early online date4 Oct 2024
DOIs
Publication statusE-pub ahead of print - 4 Oct 2024

Bibliographical note

Copyright © 2024 The Author(s). Published by Elsevier Inc. This work is licensed under a Creative Commons Attribution 4.0 International License (https://creativecommons.org/licenses/by/4.0/).

Keywords

  • financial development
  • tax evasion
  • financial institutions
  • financial markets
  • OECD

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