Chapter 4 | Page 156 indicators are validated using a case study and a qualitative review of State reports. 4.3.1 Structural challenges and policy options: Institutional capacity in revenue management Structural challenges for States in maximising revenue include: the size and composition of the economy; legal and institutional arrangements for tax collection and enforcement; and fiscal management capacity. Each is discussed below. 4.3.1.1 Size and composition of the economy The size of the informal sector plays a key role in determining the amount of tax revenue the government can raise, especially in poor countries. Because of entry barriers, only a few firms make it to the formal economy; the vast majority remain in the informal sector. Those few who make it are easily taxed by the government because they are visible and receive larger economic rents.75 In these States, therefore, a relatively small number of medium to large formal sector businesses are targeted by tax administrators, while a significant number of informal sector businesses escape ‘tax coercion’.76 This has significant revenue implications for the State. While this situation allows for the State to raise a substantial amount of revenue from fewer sources, expanding the revenue base by increasing the number of firms in the formal sector can be more beneficial. Oxfam estimates that, by addressing the informal economy, the 52 countries included in their study could collect additional revenue of between US$50.5 and 101billion per year.77 Maximisation of revenue would, thus, require lowering the barriers to 75 Emmanuelle Auriol and Michael Warlt, 'Taxation base in developing countries' (2005) 89(3) Journal of Public Economics 625-646, 18. 76 Mick Moore, 'How Does Taxation Affect the Quality of Governance?' (IDS Working Paper No. 280, Institute of Development Studies, April 2007), 29. 77 Itriago, above n 18, 7.