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

Arbeitspapier

There is limited research on the underlying institutional framework of tax policy and capacity: how tax collection efficiency changes over time and the importance of institutional factors in this process. This paper fills this gap by devising a measure of tax capacity distinct from commonly used measures of tax effort based on residuals from a tax performance (tax/gross domestic product ratio) regression. The paper uses annual data on 44 sub-Saharan African countries covering the period from 1980 to 2018. The empirical strategy separating performance from underlying fiscal capacity proceeds in three steps: estimating standard tax performance regressions, from which we generate measures of potential and actual tax revenue; decomposing the actual-to-potential tax revenue ratio to use the trend component as a measure of tax capacity; and applying general-to-specific analysis with a wide variety of economic and institutional variables as potential determinants of tax capacity to identify the most important correlates.

Object Details

• ISBN: 978-92-9267-101-3
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIDER Working Paper ; No. 2021/161

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Taxation, Subsidies, and Revenue: General ; Fiscal and Monetary Policy in Development ; Institutions and Growth
• Subject: tax capacity ; tax performance ; general-to-specific ; institutional variables

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Tagem, Abrams Mbu Enow ; Morrissey, Oliver
• Event: Veröffentlichung
• (who): The United Nations University World Institute for Development Economics Research (UNU-WIDER)
• (where): Helsinki
• (when): 2021

Further information

• DOI: doi:10.35188/UNU-WIDER/2021/101-3
• Handle: http://hdl.handle.net/10419/248375
• Last update: 10.03.2025, 11:44 AM CET