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Tax Revenue Instability in Sub-Saharan Africa: Consequences and Remedies

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  • Hélène EHRHART

    ()
    (Centre d'Etudes et de Recherches sur le Développement International)

  • Christian EBEKE

Abstract

This paper focuses on the sources and consequences of the instability of tax revenue in Sub-Saharan African countries. We take advantage of a unique and extraordinarily rich dataset on the composition of tax revenues for a large number of countries. Using panel data for 39 countries observed over the period 1980-2005, our results are threefold. Firstly, the instability of government tax revenue leads to an instability of both the public investment and government consumption, and finally, reduces the level of public investment. Secondly, foreign aid inflows appear to be an effective insurance mechanism against the instability of tax revenue by lowering the sensitivity of public investment with respect to tax revenue shocks. Finally, the reliance on domestic indirect taxation-based systems seems more stabilizing than the dependency on trade tax revenue.

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Bibliographic Info

Paper provided by CERDI in its series Working Papers with number 201025.

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Length: 30
Date of creation: 2010
Date of revision:
Handle: RePEc:cdi:wpaper:1192

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Keywords: Tax Instability; Tax Composition; public spending; foreign aid; Sub-Saharan Africa;

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Cited by:
  1. Museru, Malimu & Toerien, Francois & Gossel, Sean, 2014. "The Impact of Aid and Public Investment Volatility on Economic Growth in Sub-Saharan Africa," World Development, Elsevier, Elsevier, vol. 57(C), pages 138-147.
  2. Kearney, Colm, 2012. "Emerging markets research: Trends, issues and future directions," Emerging Markets Review, Elsevier, Elsevier, vol. 13(2), pages 159-183.
  3. Lledó, Victor & Poplawski-Ribeiro, Marcos, 2013. "Fiscal Policy Implementation in Sub-Saharan Africa," World Development, Elsevier, Elsevier, vol. 46(C), pages 79-91.
  4. Christian EBEKE & Hélène EHRHART, 2011. "Does VAT reduce the instability of tax revenues?," Working Papers 201124, CERDI.
  5. Marius Ikpe & Alwell Nteegah, 2013. "Value Added Tax and price stability in Nigeria: A partial equilibrium analysis," European Journal of Government and Economics, Europa Grande, vol. 2(2), pages 137-147, December.
  6. Moore, Mick, 2014. "Revenue Reform and Statebuilding in Anglophone Africa," World Development, Elsevier, Elsevier, vol. 60(C), pages 99-112.

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