On 20 February 2026 the IMF published a working paper with the title: Who Pays When Tax Administration Improves? Revenue, Compliance, and Behavioral Responses to Georgia’s Large Taxpayer Office, written by J. Atsebi, M. Chikviladze, M. Das, E. Loliashvili and M. Wang.
The authors note that, although tax collection is important for economic growth and development, many developing countries have revenue collection levels that are well below the levels needed to finance their development. The average tax-to-GDP ratio in emerging economies is generally around 15%, which is around half the ratio for advanced economies. This means that for developing countries, investment in infrastructure, health and education is restricted, and economic shocks are difficult to absorb.
It is therefore vital for developing countries to strengthen their tax administration to support domestic resource mobilisation. The tax administration must be in a position to identify, monitor and encourage tax compliance. An important part of the challenge is the group of large taxpayers, such as multinational companies, that should be contributing a significant part of the total tax revenue. The statistics indicate that, in both developed and developing countries, fewer than 5% of the economic entities contribute more than 40% to 50% of the total tax revenue.
Many governments have set up specialized units to administer the tax affairs of these significant taxpayers and oversee their compliance. These Large Taxpayer Offices (LTOs) concentrate their attention on the largest taxpayers, allowing the administration to devote more staff time to their tax affairs. It is estimated that on average these units result in triple the number of tax officers giving attention to large firms. Governments need to know if the costs of strengthening enforcement and improving taxpayer services through LTOs are justified by the benefits in terms of additional tax collected.
The researchers studied the LTO set up by the Republic of Georgia in 2021 with the aim of improving tax administration and compliance by the largest firms. They look at the impact of the strengthened oversight by the LTO on taxpayer behaviour and revenue collection. The data, collected from the years 2017 to 2024, takes into account the establishment of the LTO in 2021 and the changes in the eligibility threshold for LTO oversight in 2024. The researchers used a weighted difference-in-differences method, assigning weights to characteristics and observations to aim for a more accurate identification of developments that are attributable to the work of the LTO.
The authors found that assigning taxpayers to the LTO increased the annual tax assessments by around 0.4% to 0.7% of GDP, mostly from the value added tax (VAT) and withholding taxes. They noted that the LTO increased compliance using targeted enforcement and improved taxpayer services. Fewer tax audits were carried out, but these were more selective. The greatest impact of the LTO was seen in sectors where third-party reporting was strong and transactions could be traced without difficulty.
The authors conclude that enhanced oversight of large taxpayers can result in significant, lasting fiscal gains, with the impact strengthening as the LTO matures. The gains arise from improved compliance, more targeted enforcement by the tax administration and earlier reporting by taxpayers. The improved compliance by taxpayers from LTO assignment is lasting and is extended to more firms as they are assigned to LTO oversight. The establishment of an LTO can therefore be seen as an investment in state fiscal capacity. This is a scalable and cost-effective policy that can result in lasting improvements in tax compliance and revenue collection.
