What drives the performance of tax administrations? Evidence from selected european countries

An effective, efficient, fair, and trusted tax administration is a top priority for every country in the world; however, tax administration faces many issues, such as corruption, tax avoidance, or lack of flexibility. Some countries perform better in this process, and this paper aims to identify the main drivers of tax administration performance. We analyzed 35 European tax administrations by 12 performance dimensions in 2 consecutive years (2018–2019) and created a comprehensive performance measurement indicator using a data-driven neutral-aggregation approach. The findings indicate that (a) digitalization of tax administrations is the most influential driver of the overall tax administration performance, (b) Nordic countries and Switzerland can serve as role models for tax administration performance, and (c) the country-level results can serve as a proxy for the degree of the shadow economy. These findings guide European policymakers regarding the appropriate policy measures required to improve the performance of tax administration.