Effect of taxation on the productivity of firms in Ivory Coast

This paper analyses the effects of taxation on the firm productivity using a Probit model with instrumental variables based on data collected from 560 firms in Ivory Coast. Results indicate that the taxation and the performance of the firm are not antinomic objectives contrary to neo-liberal thinking. On the contrary, there is a positive correlation between these objectives. Informal enterprises which partially formalise themselves also improve their labour productivity of 40.2%, and this increase in productivity is greater (54%) when the enterprise is fully taxed. Moreover, analyses show a greater positive effect of taxation on the labour productivity by an average of 48.9% when the manager is a man rather than a woman (41.7%). Thus, the analysis is unequivocal about the idea that tax levies would reduce the productivity efforts of enterprises in the same way as any cost of legality.