Does Fiscal transparency increase Tax revenues mobilization?

The objective of this article is to provide further insight into the determinants of domestic resource mobilisation in developing countries. Using a panel of 80 countries over the period 2008, 2010, 2012, 2015, 2017, 2019, and 2021, fiscal transparency is measured through the Open Budget Index (OBI), an indicator developed by the International Budget Partnership (IBP). The empirical results, which are robust to various econometric specifications, demonstrate that the OBI is positively and significantly correlated with tax revenues as a percentage of GDP. These findings remain consistent after multiple robustness checks, including the inclusion of additional control variables and the use of an alternative measure of tax revenues. To address potential endogeneity biases, the study employs an instrumental variable (IV) approach. The results support the notion that the dissemination of high-quality information by the government could enhance tax revenue mobilisation in developing countries. This study is conducted across different country groups, specifically considering their income levels.