Structural change and tax revenue growth in ECOWAS countries

In this study, the effects of structural changes on tax performance for the countries in the ECOWAS sub-region were empirically examined. It is argued that given the nature of economic markets in the sub-region, the pattern of changes and adjustments in the structure of the economies will matter significantly for tax implications among the countries. The study considered tax performance in terms of the countries' taxes to GDP ratio. Moreover, structural changes were considered from four perspectives: Sectoral shares in output, productivity growth, social indicators, and macroeconomic factors. Data for thirteen countries of the ECOWAS sub-region from 2000 to 2022 were used in the study. The Fully Modified OLS technique was used to estimate the connection between structural change and tax performance. The study indicates that structural changes tend to matter for tax performance among ECOWAS countries. Specifically, the results show that changes in sectoral shares of the economy have a very significant impact on tax performance in the ECOWAS sub-region. While the rising share of agricultural output limits tax revenues, increased shares of the other sectors boost tax performance. There is, therefore, a need for the economies to ensure structural adjustments that are more market-based but effectively guided by policies and institutional enforcement. And that restructuring the foreign trade sector has solid implications for tax revenues among ECOWAS countries. To aid structural adjustments to the tax system, there is a need for more political support to improve tax performance.