IDEAS home Printed from https://ideas.repec.org/p/bfr/banfra/418.html
   My bibliography  Save this paper

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

Author

Abstract

This paper focuses on the sources and consequences of the instability of tax revenue in Sub-Saharan African countries. We took advantage of a unique and extraordinarily rich dataset on the composition of tax revenues for a large number of countries. Using panel data for 37 countries observed over the period 1980-2005, our results are twofold. First, the instability of government tax revenue leads to the instability of both public investment and government consumption, and also reduces the level of public investment. Second, the reliance on domestic indirect taxation-based systems appears to have a robust stabilising effect.

Suggested Citation

  • Ebeke, C. & Ehrhart, H., 2013. "Tax Revenue Instability in sub-Saharan Africa: Consequences and Remedies," Working papers 418, Banque de France.
  • Handle: RePEc:bfr:banfra:418
    as

    Download full text from publisher

    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/working-paper_418_2013.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    2. Guillaumont, Patrick & Jeanneney, Sylviane Guillaumont & Brun, Jean-Francois, 1999. "How Instability Lowers African Growth," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(1), pages 87-107, March.
    3. Lim, David, 1983. "Instability of government revenue and expenditure in less developed countries," World Development, Elsevier, vol. 11(5), pages 447-450, May.
    4. Antonio Fatás & Ilian Mihov, 2003. "The Case for Restricting Fiscal Policy Discretion," The Quarterly Journal of Economics, Oxford University Press, pages 1419-1447.
    5. Michael Keen & Mario Mansour, 2010. "Revenue Mobilisation in Sub-Saharan Africa: Challenges from Globalisation I - Trade Reform," Development Policy Review, Overseas Development Institute, vol. 28(5), pages 553-571, September.
    6. Helene Ehrhart, 2013. "Elections and the structure of taxation in developing countries," Public Choice, Springer, vol. 156(1), pages 195-211, July.
    7. Keen, Michael & Lockwood, Ben, 2010. "The value added tax: Its causes and consequences," Journal of Development Economics, Elsevier, pages 138-151.
    8. Jean-Louis COMBES & Gérard CHAMBAS & Jean-François BRUN, 2006. "Recettes publiques des pays en développement. Méthode d’évaluation," Working Papers 200611, CERDI.
    9. Norman V. Loayza & Romain Rancière & Luis Servén & Jaume Ventura, 2007. "Macroeconomic Volatility and Welfare in Developing Countries: An Introduction," World Bank Economic Review, World Bank Group, vol. 21(3), pages 343-357, October.
    10. Aghion, Philippe & Bacchetta, Philippe & Rancière, Romain & Rogoff, Kenneth, 2009. "Exchange rate volatility and productivity growth: The role of financial development," Journal of Monetary Economics, Elsevier, pages 494-513.
    11. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, pages 563-577.
    12. Karuna Gomanee & Sourafel Girma & Oliver Morrissey, 2005. "Aid and growth in Sub-Saharan Africa: accounting for transmission mechanisms," Journal of International Development, John Wiley & Sons, Ltd., pages 1055-1075.
    13. Axel Dreher & Jan-Egbert Sturm & Heinrich Ursprung, 2008. "The impact of globalization on the composition of government expenditures: Evidence from panel data," Public Choice, Springer, vol. 134(3), pages 263-292, March.
    14. Akitoby, Bernardin & Clements, Benedict & Gupta, Sanjeev & Inchauste, Gabriela, 2006. "Public spending, voracity, and Wagner's law in developing countries," European Journal of Political Economy, Elsevier, vol. 22(4), pages 908-924, December.
    15. John Thornton, 2008. "Explaining Procyclical Fiscal Policy in African Countries †," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 17(3), pages 451-464, June.
    16. Miguel D. Ramirez & Nader Nazmi, 2003. "Public Investment and Economic Growth in Latin America: an Empirical Test," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 115-126, February.
    17. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, pages 563-577.
    18. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    19. Michael Keen & Mario Mansour, 2010. "Revenue Mobilisation in Sub-Saharan Africa: Challenges from Globalisation II - Corporate Taxation," Development Policy Review, Overseas Development Institute, vol. 28(5), pages 573-596, September.
    20. Karuna Gomanee & Sourafel Girma & Oliver Morrissey, 2005. "Aid and growth in Sub-Saharan Africa: accounting for transmission mechanisms," Journal of International Development, John Wiley & Sons, Ltd., pages 1055-1075.
    21. Richard Blundell & Stephen Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
    22. Shi, Min & Svensson, Jakob, 2006. "Political budget cycles: Do they differ across countries and why?," Journal of Public Economics, Elsevier, pages 1367-1389.
    23. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, pages 156-190.
    24. Davide Furceri, 2007. "Is Government Expenditure Volatility Harmful for Growth? A Cross-Country Analysis," Fiscal Studies, Institute for Fiscal Studies, pages 103-120.
    25. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2006. "Growth volatility and financial liberalization," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 370-403, April.
    26. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, pages 139-162.
    27. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, pages 115-143.
    28. Fosu, Augustin Kwasi, 2007. "The External Debt-Servicing Constraint and Public Expenditure Composition: Evidence from African Economies," WIDER Working Paper Series 036, World Institute for Development Economic Research (UNU-WIDER).
    29. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    30. Diallo, Oumar, 2009. "Tortuous road toward countercyclical fiscal policy: Lessons from democratized sub-Saharan Africa," Journal of Policy Modeling, Elsevier, pages 36-50.
    31. Janet Gale Stotsky & Asegedech WoldeMariam, 1997. "Tax Effort in Sub-Saharan Africa," IMF Working Papers 97/107, International Monetary Fund.
    32. Fielding, David, 1997. "Modelling the Determinants of Government Expenditure in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 377-390, October.
    33. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, pages 115-143.
    34. Mario Mansour & Michael Keen, 2009. "Revenue Mobilization in Sub-Saharan Africa; Challenges from Globalization," IMF Working Papers 09/157, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kearney, Colm, 2012. "Emerging markets research: Trends, issues and future directions," Emerging Markets Review, Elsevier, vol. 13(2), pages 159-183.
    2. Janet Gale Stotsky & Lisa L Kolovich & Suhaib Kebhaj, 2016. "Sub-Saharan Africa; A Survey of Gender Budgeting Efforts," IMF Working Papers 16/152, International Monetary Fund.
    3. Kaisa Alavuotunki, & Jukka Pirttilä2, 2015. "The consequences of the value-added tax on inequality," WIDER Working Paper Series 111, World Institute for Development Economic Research (UNU-WIDER).
    4. 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, vol. 57(C), pages 138-147.
    5. Christian EBEKE, 2010. "Remittances, Value Added Tax and Tax Revenue in Developing Countries," Working Papers 201030, CERDI.
    6. repec:kap:itaxpf:v:24:y:2017:i:6:d:10.1007_s10797-016-9406-3 is not listed on IDEAS
    7. Kaisa Alavuotunki & Mika Haapanen & Jukka Pirttilä, 2017. "The Consequences of the Value-Added Tax on Inequality," CESifo Working Paper Series 6318, CESifo Group Munich.
    8. Vitor Gaspar & Laura Jaramillo & Philippe Wingender, 2016. "Tax Capacity and Growth; Is there a Tipping Point?," IMF Working Papers 16/234, International Monetary Fund.
    9. Christian EBEKE & Hélène EHRHART, 2011. "Does VAT reduce the instability of tax revenues?," Working Papers 201124, CERDI.
    10. Moore, Mick, 2014. "Revenue Reform and Statebuilding in Anglophone Africa," World Development, Elsevier, vol. 60(C), pages 99-112.
    11. Lledó, Victor & Poplawski-Ribeiro, Marcos, 2013. "Fiscal Policy Implementation in Sub-Saharan Africa," World Development, Elsevier, pages 79-91.
    12. 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.
    13. repec:aes:amfeco:v:46:y:2017:i:19:p:640 is not listed on IDEAS
    14. Christian von Haldenwang & Maksym Ivanyna, 2017. "Does the political resource curse affect public finance? The vulnerability of tax revenue in resource-rich countries," WIDER Working Paper Series 007, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Tax instability; tax composition; public spending; Sub-Saharan Africa.;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:418. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael brassart). General contact details of provider: http://edirc.repec.org/data/bdfgvfr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.