A conditional directional distance function approach for measuring tax collection efficiency: evidence from Spanish regional offices

Abstract

This paper analyzes the evolution of the technical efficiency of Spanish regional tax offices with respect to the main devolved taxes for the period 2005–2014. We apply the conditional directional distance function methodology, which allows us to incorporate undesirable outputs into the production function, represented by administrative complaints lodged by taxpayers as an (inverse) measure of the quality of service provision, and account for the influence of the socioeconomic context in which these offices operate. This methodology has been adapted for application in a dynamic context in order to analyze how the performance of these units has evolved over a period that includes different stages of the economic cycle. The main results show that efficiency levels have fallen over the period, especially since the start of the economic recession. Likewise, we identify that the influence of incomes and fiscal capacity are especially significant explanatory factors of this evolution. © 2018 The Authors. International Transactions in Operational Research © 2018 International Federation of Operational Research Societies