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Why Majority of Third World Governments Have Difficulties Raising Adequate Revenue

February 23, 2014

It is a well known fact that majority of third world governments tend to have difficulties raising adequate revenue to finance their operations.

The first reason as to why majority of third world governments have difficulties raising adequate revenue is because most of the people they govern are poor. Some of these are people who are so poor that you can’t even ask them to do tax filings. Even the seemingly better off people in these countries, including those in the likes of the retail sector, still tend to be poor people by global standards. Collecting taxes from these sorts of people is likely to end up costing more than the amounts of money that are collected at the end of the day.

The second reason as to why majority of third world governments have difficulties raising adequate revenue is because they often lack the structures for proper revenue collection.

The third reason as to why majority of third world governments have difficulties raising adequate revenue is because corruption tend to be endemic in the countries they rule over. Corruption has a direct as well as an indirect impact on revenue collection. These are hindrances to collection of revenues from both the corporations working there and the individuals living there.

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