Tax policies seen in developing countries are puzzling on many dimensions, given the sharp contrast between these policies and both those seen in developed countries and those forecast in the optimal tax literature. In this paper, we explore how forecasted policies change if firms can...

Observed economic policies in developing countries differ sharply both from those observed among developed countries and from those forecast by existing models of optimal policies. For example, developing countries rely little on broad-based taxes, and make substantial use of tariffs and...

In this paper, we argue that all of these aspects of policy may be sensible responses if a government is able in practice to collect taxes only from those firms that make use of the financial sector. Through use of the financial sector, firms generate a paper trail, facilitating tax enforcement....