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

  • Hélène EHRHART

    ()

    (Centre d'Etudes et de Recherches sur le Développement International)

  • Christian EBEKE

This paper focuses on the sources and consequences of the instability of tax revenue in Sub-Saharan African countries. We take advantage of a unique and extraordinarily rich dataset on the composition of tax revenues for a large number of countries. Using panel data for 39 countries observed over the period 1980-2005, our results are threefold. Firstly, the instability of government tax revenue leads to an instability of both the public investment and government consumption, and finally, reduces the level of public investment. Secondly, foreign aid inflows appear to be an effective insurance mechanism against the instability of tax revenue by lowering the sensitivity of public investment with respect to tax revenue shocks. Finally, the reliance on domestic indirect taxation-based systems seems more stabilizing than the dependency on trade tax revenue.

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Paper provided by CERDI in its series Working Papers with number 201025.

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Length: 30
Date of creation: 2010
Date of revision:
Handle: RePEc:cdi:wpaper:1192
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