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Tax incentives can be a useful tool to stimulate investment in developing countries. However, interest groups often are able to exert considerable influence in its management, if not its design. The purpose of this paper is to use a power-based approach to the political economy of tax reform to analyse the case of tax incentives for investment in the Dominican Republic. Based on original interviews and a detailed analysis of regulations, the authors study how interest groups work within the institutional framework to seek outcomes that best fit their objectives. However, when unsuccessful, they become powerful advocates of change. These power dynamics have important implications for the design and management of tax incentives in the Dominican Republic and in other developing economies.

Case study based on informed interviews with policy makers, lobbyists and researchers combined with statistical and administrative information to test the main hypotheses.

While the role of influence groups in creating tax schemes has been widely studied, the authors show that these groups can also have an important role in the administration of the regime and making it more or less open to modifications. The paper shows that the capture of investment incentives has rendered the tax system rigid and unstable in the Dominican Republic, subjecting the public interest hostage to the gain of few.

Therefore, there is a need to review and reform tax policy, not just from a technical viewpoint, but more importantly altering the political arrangements. More transparency in assessing the impact of these schemes, disclosing information of who has access to tax exemptions and budgeting the tax expenditures can also be tools to increase public control over these instruments. Also, making it more difficult to grant tax incentives, for example by asking for an ex-ante justification and quantification of the externalities supposedly being created would reduce the abuse by power groups of these instruments. Without more balanced and independent leadership, it would be extremely difficult to advance in these fields.

The literature on the political economy of tax incentives normally focuses on how key actors work around the institutional framework to solve conflict of interests. This paper addresses a complementary – and in the viewpoint equally relevant – aspect of the political economy of tax incentives: once enacted, vested interests have a particular motivation to keep the incentives in place, and therefore the authors should understand how key actors work from within the institutional framework to seek the outcomes that better suit their interests. The analysis focuses on Dominican Republic, based on official data and additional in-depth interviews with policy makers, entrepreneurs and consultants that assist firms with tax and regulation issues.

This paper aims to understand the relationship in developing countries between fiscal consolidation and public investment – a flexible part of the budget that is easier to cut during consolidation effort, but with potentially negative growth effects. Analyzing in detail the case of Peru, the paper explores alternative fiscal rules and frameworks that might help create fiscal space for infrastructure investment.

The paper analyses trends in public and total infrastructure investment in six large Latin American economies, in the light of fiscal developments since the early 1980s. In particular, the paper explores the association between fiscal consolidations (improvements in the structural fiscal balance) and public infrastructure investment rates. In the second part, the paper analyzes recent changes in the fiscal framework of Peru and shows how they were conductive in creating additional fiscal space.

The authors argue that post-crisis fiscal frameworks, notably fiscal rules that are increasingly popular in the region, should not only consolidate the recent progress towards debt sustainability, but also create the fiscal space to close these infrastructure gaps. These points are illustrated in a detailed account of recent developments in the fiscal framework and public investment in the Peruvian case.

The paper contributes new evidence to the literature on fiscal consolidation and the composition of government expenditures. While the literature based on evidence from the 1990s has argued that fiscal consolidation plans in Latin America have almost always led to a significant reduction in public infrastructure investment, the paper finds less clear cut evidence when extending the analysis backwards (1980s) and forwards (2000s). The example of the case of Peru is used to explore fiscal institutions and rules that might be useful for other developing countries that face important infrastructure gaps.

The paper aims to examine agrochemical traders’ tax morale in three Ghanaian regions.

Primary data were collected from 92 respondents using structured questionnaires. A multistage sampling technique was employed and used in selecting respondents.. Descriptive statistics, factor analysis and quantile regression analysis were used to analyse data obtained via the questionnaires.

The study found tax reporting knowledge, tax calculating knowledge and tax payment knowledge to be the keen factors influencing agrochemical traders’ tax knowledge. It was also revealed that age, religion and marriage positively influence the tax morale of traders. Inversely, gender, high level of education and monthly sales were found to affect tax morale negatively. Moreover, trust (respect, trustworthiness and expertise knowledge) negatively influenced tax morale. Authorities’ tax knowledge and power (sanction and lockdown) were revealed to impact tax morale positively. However, tax morale decreases amongst agrochemical traders with higher tax morale when sanction increases.

Unlike previous studies which focussed on tax morale amongst individuals and firms outside the agribusiness sector, this study examined the tax morale within the informal agrochemical trading sector, which has recently attracted colossal patronage due to the high usage of agrochemicals amongst farmers in Africa and Ghana. This study also assumed tax morale to be at different levels; hence the factors that affect the morale at different levels differ. Therefore, the study examined the factors influencing tax morale amongst agrochemical traders by segregating tax morale into quartiles. Relating to theory, the economic deterrence theory was used to ground the study, which is not usually used in most tax morale studies.