Does E-government Improve Government Capacity? Evidence from Tax Administration and Public Procurement

Anna Kochanova (Max Planck Institute for Research on Collective Go)
Zahid Hasnain (World Bank)
Bradley Larson (World Bank)

Abstract: Using a cross-country dataset on e-government systems, we analyze whether e-filing of taxes and e-procurement adoption improves the capacity of governments to raise and spend resources through the lowering of tax compliance costs, improvement of public procurement competitiveness, and reduction of corruption. We find that information and communications technology can help improve government capacity, but the impact of e-government varies by type of government activity and is stronger in more developed countries. Implementation of e-filing systems reduces tax compliance costs as measured by the number of tax payments; time required to prepare and pay taxes; likelihood and frequency of firms being visited by a tax official; the perception of tax administration as an obstacle; and the incidence of bribery. The effects of e-procurement are weaker, with the number of firms securing or attempting to secure a government contract increasing with e-procurement implementation only in countries with higher levels of development and better quality institutions. We find no systematic relationship between e-procurement and bureaucratic corruption.

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