Mobilizing Revenue in Sub-Saharan Africa: Empirical Norms and Key Determinants

44 Pages Posted: 27 Aug 2012

See all articles by Paulo Drummond

Paulo Drummond

International Monetary Fund (IMF)

Wendell Daal

affiliation not provided to SSRN

Nandini Srivastava

affiliation not provided to SSRN

Luis Oliveira

International Monetary Fund (IMF)

Date Written: May 2012

Abstract

Mobilizing more revenue is a priority for sub-Saharan African (SSA) countries. Countries have to finance their development agendas, and weak revenue mobilization is the root cause of fiscal imbalances in several countries. This paper reviews the experience of low-income SSA countries in mobilizing revenue in recent decades, with two broad aims: identify empirical norms of how much and how fast countries have been able to mobilize more revenue and empirical determinants (panel estimates) of revenue mobilization. The paper finds that (i) the frequency distribution of changes in revenue ratios for SSA low-income countries (LICs) peaks at a pace of about ½-2 percentage points of GDP in the short-to-medium term and at a pace of about 2-3½ percentage points of GDP over the longer term, and that (ii) almost all SSA-LICs managed to increase revenue ratios by more than 2 percentage points of GDP in the short-to-medium term, at least once in the last two decades. The sustainability of large increases in revenue ratios can be an issue, in particular for fragile countries. The panel estimates suggest that structural factors, such as per capita GDP, share of agriculture in GDP, inflation, degree of openness, and rents received from natural resources, are important determinants of tax revenue.

Keywords: Revenue Mobilization, Econometric Panel Estimation, Low-income Developing Countries, tax revenue, fiscal revenue, tax policy, taxation, tax effort, tax system, tax base, tax administration, fiscal policy, commodity prices, direct investment, tax reform, foreign direct investment, tax collection, tax ratio, public investment, tax rates, tax incentives, tax systems, foreign debt, investors, tax evasion, fiscal imbalances, investment decisions, public finance, tax competition, fiscal space, tax returns, budget deficits, public finances, corporate taxes, tax ratios, budget surplus, tax incentive, budget support, fiscal incentives, tax potential, revenue collection, fiscal affairs, fiscal incenti

JEL Classification: H20, C33, C59

Suggested Citation

Drummond, Paulo and Daal, Wendell and Srivastava, Nandini and Oliveira, Luis, Mobilizing Revenue in Sub-Saharan Africa: Empirical Norms and Key Determinants (May 2012). IMF Working Paper No. 12/108, Available at SSRN: https://ssrn.com/abstract=2135987

Paulo Drummond (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Wendell Daal

affiliation not provided to SSRN

No Address Available

Nandini Srivastava

affiliation not provided to SSRN

No Address Available

Luis Oliveira

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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