<p>Governments have a responsibility to fulfill their constitutional duties, which requires them to utilize various financial sources. Among these sources, tax revenue is the most significant due to its transparency in collection and allocation. However, taxation has always presented challenges for governments, and the factors that contribute to increased tax revenues have been the focus of economic studies. Institutional quality is one of the most influential variables impacting tax revenue. Despite this, the relationship between institutional quality and financial income has received limited attention in previous studies. This study aims to investigate the causal relationship between tax revenue and institutional quality in a group of developed and developing countries from 2002 to 2021. To achieve this, six indicators of institutional quality and tax revenue statistics were analyzed using the Dumitrescu and Hurlin (2012) causality method, which accounts for cross-sectional dependence and heterogeneity. The quantitative analysis results indicate that there is no long-term relationship between institutional quality and tax revenue in both groups of countries. However, in the short term, corruption control significantly influences tax revenue in developed countries, while tax revenue impacts political stability. In developing countries, tax revenue is affected by all institutional quality indicators except the rule of law, with tax revenue influencing only the rule of law. The robustness analysis, using international trade taxes instead of general tax revenues, reveals a broader bidirectional causality, particularly in developing countries where trade taxes significantly affect regulatory quality, government effectiveness, and political stability, and in developed countries where multiple institutional indicators influence trade taxes.</p>