Rule of Law, Corruption, and Tax Revenue Performance
Rule of Law, Corruption, and Tax Revenue Performance

Author(s): Danijela Miloshoska
Subject(s): Social Sciences
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: Tax revenue; Rule of law; Corruption; Western Balkan; North Macedonia
Summary/Abstract: Tax revenue refers to the income generated by governments and serves as a critical funding source for public services, infrastructure development, and social welfare programs. While effective legal frameworks and enforcement mechanisms facilitate tax compliance, corruption undermines tax collection efforts, erodes public trust, and distorts economic activity. This study examines the relationship between the rule of law, corruption, and tax revenue performance in North Macedonia. Comparative analyses of the World Bank Governance Indicators - Rule of Law Index and Control of Corruption Index were conducted among countries in the Western Balkan region. Secondary data from the World Bank were utilized, and multiple regression analysis was conducted to determine the impact of the Rule of Law index and Corruption index on tax revenue performance for North Macedonia. Findings indicate weak governance performance related to the rule of law and control of corruption across the Western Balkan region, with the index for all countries below 0. In North Macedonia specifically, findings indicate that approximately 50.7% of the variability in tax revenue can be explained by the rule of law and control of corruption indices. The correlation coefficient of 0,71, suggests a strong positive correlation between tax revenue (% of GDP) and the Rule of Law and Control of Corruption. These findings underscore the significance of addressing corruption and strengthening the rule of law to enhance tax revenue performance.

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