The Estimation of Tax Capacity in Oil Exporting Countries: A Panel Data Approach

Abstract: The tax capacity is one of the main concepts in public finance and provides the required information on state economic power in mobilizing the tax resources for responding the financial problems and execution of economic policies. For this purpose, the main objective of this paper is to estimate the tax capacity for oil exporting countries over the period of 1995-2008 by applying panel data approach. The summary of results indicates that the GDP per capita and trade openness are the main factors affecting the ratio of tax revenue to GDP. Also, the empirical findings of this study reveal that countries with a low share of oil exports have more Potential tax capacities. Moreover, the potential tax capacity of Iran is the same as its actual tax during the period of study.