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Mobilizing Revenue in Sub-Saharan Africa: Empirical Norms and Key Determinants

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  • International Monetary Fund
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    Abstract

    Mobilizing more revenue is a priority for sub-Saharan African (SSA) countries. Countries have to finance their development agendas, and weak revenue mobilization is the root cause of fiscal imbalances in several countries. This paper reviews the experience of low-income SSA countries in mobilizing revenue in recent decades, with two broad aims: identify empirical norms of how much and how fast countries have been able to mobilize more revenue and empirical determinants (panel estimates) of revenue mobilization. The paper finds that (i) the frequency distribution of changes in revenue ratios for SSA low-income countries (LICs) peaks at a pace of about �-2 percentage points of GDP in the short-to-medium term and at a pace of about 2-3� percentage points of GDP over the longer term, and that (ii) almost all SSA-LICs managed to increase revenue ratios by more than 2 percentage points of GDP in the short-to-medium term, at least once in the last two decades. The sustainability of large increases in revenue ratios can be an issue, in particular for fragile countries. The panel estimates suggest that structural factors, such as per capita GDP, share of agriculture in GDP, inflation, degree of openness, and rents received from natural resources, are important determinants of tax revenue.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/108.

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    Length: 43
    Date of creation: 01 May 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/108

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    Keywords: Revenue mobilization; Low-income developing countries;

    This paper has been announced in the following NEP Reports:

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    1. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2008. "Societal Institutions and Tax Effort in Developing Countries," CEMA Working Papers 582, China Economics and Management Academy, Central University of Finance and Economics.
    2. Roberto Perotti, 1999. "Fiscal Policy In Good Times And Bad," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1399-1436, November.
    3. Terence D. Agbeyegbe & Janet Gale Stotsky & Asegedech WoldeMariam, 2004. "Trade Liberalization, Exchange Rate Changes, and Tax Revenue in Sub-Saharan Africa," IMF Working Papers 04/178, International Monetary Fund.
    4. Aizenman, Joshua & Jinjarak, Yothin, 2006. "Globalization and Developing Countries - a Shrinking Tax Base ?," Santa Cruz Department of Economics, Working Paper Series qt8r12k4xr, Department of Economics, UC Santa Cruz.
    5. Mario Mansour & Michael Keen, 2009. "Revenue Mobilization in Sub-Saharan Africa: Challenges from Globalization," IMF Working Papers 09/157, International Monetary Fund.
    6. Robert Osei & Oliver Morrissey & Tim Lloyd, 2005. "The fiscal effects of aid in Ghana," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 1037-1053.
    7. Oks, Daniel & van Wijnbergen, Sweder, 1994. "Mexico after the debt crisis : is growth sustainable?," Policy Research Working Paper Series 1378, The World Bank.
    8. Markus Bruckner & Rabah Arezki, 2010. "International Commodity Price Shocks, Democracy, and External Debt," IMF Working Papers 10/53, International Monetary Fund.
    9. Joweria M. Teera & John Hudson, 2004. "Tax performance: a comparative study," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(6), pages 785-802.
    10. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    11. Jean-Jacques Hallaert, 2008. "How does a domestic tax reform effect protection against imports? The case of the Republic of Madagascar," IMF Working Papers 08/151, International Monetary Fund.
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