The present study explores determinants of tax ratios using dataset of lower middle income and upper middle income countries. Using data of 11 developing countries during 1985-2010, the study adds to the existing theoretical as well as empirical literature on revenue collection in developing countries. The study identifies that the variables like non-tax revenue, foreign grants, total external debt, total internal debt, inflation rate and growth rate of per capita income are the significant determinants of tax ratios in the sample countries. On average, non-tax revenue and foreign grants reduce the tax collection performance of the developing world. The paper further suggests that issuance of domestic debt in lower middle income economies, working through crowding out the private investment, reduces tax collection from the private sector. These countries have an alternative to switch to the international capital market where concessionary loans are available. The study also finds inflation as a significant determinant of tax ratio. However, it can push the tax ratio index in either direction. So monetary authorities in developing countries should be in contact with the fiscal ones for better management of macro economy. Governments in lower middle income economies also need to introduce tax reforms such that increase in growth rate of per capita income may be able to generate enhanced national budget. The research finds negative but insignificant impact of Asian financial crisis (1997) on tax ratios in the selected sample economies. Supervisor:- Dr. Hasan M. Mohsin