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Building Fiscal Capacity in Developing Countries: Evidence on the Role of Information Technology

Author

Listed:
  • Merima Ali
  • Abdulaziz B. Shifa
  • Abebe Shimeles
  • Firew Woldeyes

Abstract

Weak fiscal capacity is a major challenge in low-income countries. Recently, governments have adopted information technology to modernize tax collection; however, there is little evidence on the impact of such reforms. We narrow this gap using unique administrative firm-level panel data covering all business taxpayers in Ethiopia. We find a robust increase in value-added tax collections and reported sales following the adoption of electronic sales register machines (ESRMs), without decreasing formal employment. These effects are larger among downstream firms. ESRM adoption is also associated with a decrease in entry into downstream sectors.

Suggested Citation

  • Merima Ali & Abdulaziz B. Shifa & Abebe Shimeles & Firew Woldeyes, 2021. "Building Fiscal Capacity in Developing Countries: Evidence on the Role of Information Technology," National Tax Journal, University of Chicago Press, vol. 74(3), pages 591-620.
    • Handle: RePEc:ucp:nattax:doi:10.1086/715511
    DOI: 10.1086/715511
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    Cited by:

    1. Ambel, Alemayehu A. & Woldeyes, Firew Bekele, 2024. "Does Unequal Tax Burden Contribute to Women-Owned Businesses Leaving the Tax Net ?," Policy Research Working Paper Series 10712, The World Bank.
    2. Oyebola Okunogbe & Fabrizio Santoro, 2023. "Increasing Tax Collection in African Countries: The Role of Information Technology," Journal of African Economies, Centre for the Study of African Economies, vol. 32(Supplemen), pages 57-83.
    3. Das, Satadru & Gadenne, Lucie & Nandi, Tushar & Warwick, Ross, 2023. "Does going cashless make you tax-rich? Evidence from India’s demonetization experiment," Journal of Public Economics, Elsevier, vol. 224(C).
    4. Bálint Ván & Gábor Lovics & Csaba G. Tóth & Katalin Szőke, 2025. "Digitalization against tax evasion: evidence on the role of company size," Journal of Business Economics, Springer, vol. 95(5), pages 749-776, July.
    5. Timbul Hamonangan Simanjuntak & Imam Mukhlis, 2017. "The Relation of Fiscal Decentralization, Regional Finance and Social Justice for the Local Development of Indonesia," Applied Economics and Finance, Redfame publishing, vol. 4(1), pages 9-17, January.
    6. Lucena, João Paulo Oliveira & Sampaio, Raquel Menezes Bezerra, 2025. "Does municipality size matter? The impact of introducing the electronic consumer invoice (NFC-e)," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1763-1781.
    7. Jean-François Brun & Gérard Chambas & Jules Tapsoba & Abdoul-Akim Wandaogo, 2020. "Are ICT's boosting tax revenues? Evidence from developing countries," CERDI Working papers hal-02979897, HAL.
    8. Jean-François Brun & Gérard Chambas & Jules Tapsoba & Abdoul-Akim Wandaogo, 2020. "Are ICT's boosting tax revenues? Evidence from developing countries," Working Papers hal-02979897, HAL.
    9. Kotsogiannis, Christos & Salvadori, Luca & Karangwa, John & Murasi, Innocente, 2025. "E-invoicing, tax audits and VAT compliance," Journal of Development Economics, Elsevier, vol. 172(C).
    10. Jorge Martínez-Vázquez, 2025. "The Art of Tax Reform," Hacienda Pública Española / Review of Public Economics, IEF, vol. 255(4), pages 87-131, December.
    11. von Haldenwang, Christian, 2020. "Digitalising the fiscal contract: An interdisciplinary framework for empirical inquiry," IDOS Discussion Papers 20/2020, German Institute of Development and Sustainability (IDOS).
    12. Bruno Emmanuel Ongo Nkoa & Jacques Simon Song, 2022. "Les canaux de transmission des effets des TIC sur la mobilisation des recettes fiscales en Afrique," African Development Review, African Development Bank, vol. 34(S1), pages 80-101, July.

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