What are the drivers of tax capacity in sub-Saharan Africa?

Tagem, Abrams M.E.; Morrissey, Oliver

doi:10.35188/unu-wider/2021/101-3

Cited by 6 publications

(17 citation statements)

References 37 publications

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“…The analysis could provide candidates for subsequent attempts to identify causal factors, but this would not be a promising avenue in the exploratory cross-country analysis given the number of plausible 'causal mechanisms' and potentially complex interactions that can vary across countries and time. Bivariate scatter plots (Tagem and Morrissey, 2021) between C and the main measures of governance (equal distribution, corruption and vertical accountability) show a strong relationship which matches a priori expectations: higher scores on the governance variables are associated with higher capacity (C greater than 1) and countries with the lowest tax capacity (C less than 0.8) have among the lowest values for all three governance measures. This suggests that these governance indicators are good candidates as determinants of tax capacity.…”

Section: Identifying the Covariates Of Csupporting

confidence: 79%

“…The correlation between E and C is very high, at 0.96, indicating that on average countries are close to their (structural) potential. Some deviations are clear in Figure 1b, but the main determinants of E are the same as in Table 1 for C (Tagem and Morrissey, 2022).…”

Section: Identifying the Covariates Of Cmentioning

confidence: 82%

“…We assume the vectors of parameter coefficients (β 1 , β 2 , σ i ) differ across countries but are constant over time. Equation ( 1) is estimated using standard fixed effects (including country and year fixed effects) and more rigorous panel time series estimators to address econometric concerns such as cross-country and unobserved heterogeneity (details in Tagem and Morrissey 2022).…”

Section: Estimation Strategymentioning

confidence: 99%

“…7 All V-Dem indicators are rescaled to range from 0 to 7 Although it may appear a useful way to incorporate multiple indicators, V-Dem variables are not combined using principal components because: (i) we are testing for which aspects of institutions affect performance (each V-Dem indicator has distinct components); (ii) any composite measure would be more difficult to interpret; and (iii) many V-Dem indices have elements based on principal components. 100 and corruption is rescaled so that higher values are more corruption (see Tagem and Morrissey 2022); structural and non-income variables are in natural logs for estimation. We start by estimating a general model with all potentially important independent variables.…”

Section: Identifying the Covariates Of Cmentioning

confidence: 99%

“…The empirical analysis comprises three steps. First, we employ a variety of econometric techniques to estimate tax performance using standard structural characteristics and other revenuesaid (net aid, grants), NTR, and total natural resource rentsas applied in the literature (for a review see McNabb et al, 2021;Tagem and Morrissey, 2021). The most robust variables are then used in a very parsimonious tax performance equation to estimate potential tax revenue, from which we measure performance efficiency (an indicator of tax effort) as the ratio of actual to potential tax revenue.…”

Section: Introductionmentioning

confidence: 99%

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Institutions and tax capacity in sub-Saharan Africa

Tagem

Morrissey

2023

Journal of Institutional Economics

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This paper contributes to research on the institutional determinants of tax capacity using annual data from 39 sub-Saharan African countries from 1985 to 2018 to construct a measure of tax capacity for each country based on the trend component of the ratio of actual to potential tax revenue. Potential revenue is estimated by a parsimonious tax performance specification, including only variables found to be robust determinants of the tax/GDP ratio. The results show that, on average, tax capacity is high (given potential) and has improved over time (especially for low-income countries). The final stage of analysis selects, from a wide variety of economic and institutional variables, the most important determinants of cross-country variation in tax capacity. Equal distribution of resources is the most important institutional factor associated with greater capacity, consistent with perceptions of equity supporting the fiscal bargain; corruption is associated with lower capacity, consistent with undermining trust in government. Private consumption and resource rents are associated with greater capacity. Other institutional factors are indirectly associated with greater capacity, such as accountability and elements of democracy associated with equity in the allocation and use of public resources.

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Section: Identifying the Covariates Of Csupporting

confidence: 79%

Section: Identifying the Covariates Of Cmentioning

confidence: 82%

Section: Estimation Strategymentioning

confidence: 99%

Section: Identifying the Covariates Of Cmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Institutions and tax capacity in sub-Saharan Africa

Tagem

Morrissey

2023

Journal of Institutional Economics

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Tax revenue mobilization and institutional quality in sub‐Saharan Africa: An empirical investigation

Bah

2024

African Development Review

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This paper investigates the effects of institutional quality on tax revenue collection in sub‐Saharan African countries. We include the six institutional quality indicators (i.e., voice and accountability, political stability, regulatory quality, rule of law, control of corruption, and government effectiveness) as explanatory factors for tax revenues and its components in a sample of 42 countries over the period 1996–2019. A system GMM approach was used for the estimations. Consistent with previous results, we find that institutional quality has positive and significant effects on tax revenue collection in sub‐Saharan Africa. Specifically, aggregate total tax revenues, direct taxes, income taxes, and goods and services taxes are positively affected by the six institutional quality indicators. Indirect taxes are positively associated with four indicators, with the exception of government effectiveness and political stability, while tax on international trade are affected by institutional quality factors, with the exception of control of corruption and voice and accountability. These findings indicate that sub‐Saharan African countries should improve institutional quality to boost tax revenue collection.

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Assessing the impact of aid on public health expenditure in aid recipient countries

Lim

Kim

Connolly

2022

Development Policy Review

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Motivation: The relationship between aid flows and recipients' spending on health is an important component of the ongoing attempt to measure and improve aid effectiveness. Purpose: This article aims to reveal complex interactions occurring between donors, who use surveillance and monitoring to ensure that their aid is effective, and recipients who are pursuing individual political survival in conjunction with national development. Methods and approach: This study applies a fixed-effects model to a dataset of 111 aid recipients from 2000-2018.Findings: This study finds that the impact of democracy, government effectiveness, and political stability on public health spending declines as more aid is introduced. Policy implications: The findings suggest that aid could lead to reductions in health expenditure when the donor community's surveillance focuses more on risky or untrustworthy recipients and indirectly creates incentives for good recipients to divert funding away from the health sector.

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What are the drivers of tax capacity in sub-Saharan Africa?

Abstract: This study is published within the UNU-WIDER project Fiscal states-the origins and developmental implications, which is part of the Domestic Revenue Mobilization programme. The programme is financed through specific contributions by the Norwegian Agency for Development Cooperation (Norad).

Cited by 6 publications

References 37 publications

Institutions and tax capacity in sub-Saharan Africa

Institutions and tax capacity in sub-Saharan Africa

Tax revenue mobilization and institutional quality in sub‐Saharan Africa: An empirical investigation

Assessing the impact of aid on public health expenditure in aid recipient countries

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