Tax and Governance
There is mounting evidence that increased taxation can spur statebuilding and increase government accountability. This possibility is critical: without strong links between taxation, statebuilding and accountability, expanded taxation may fail to deliver improved outcomes for taxpayers. However, such links are far from guaranteed, and depend, among other things, on the types of taxes raised, the nature and equity of tax enforcement, the extent of transparency, the existence of forums for popular engagement and the role of civil society in supporting popular demand making. The current phase of our research on this theme focuses on identifying concrete strategies for strengthening the links between taxation and good governance at both the local and national levels.
Publications:
This paper explores why taxation reforms are so different in fragile states, the conditions in which they occur, and what can be done to make these reforms more successful – including contributing, whenever possible, to state-building. Based on extensive engagement and fieldwork in the Sahel and other regions in sub-Saharan Africa (including Central and West…
This paper explores the relationship between tax rates and tax evasion in a low-income country context: Ethiopia. By using transaction-level administrative trade data, the authors are able to provide an analysis that is largely comparable with the rest of the literature while also introducing two important innovations. First, they compare the elasticity of evasion to…
Most people in low-income countries contribute substantially to the financing of local public goods through informal revenue generation (IRG). However, very little is known about how IRG works in practice. We produce novel evidence on the magnitude and regressivity of IRG and its relationship with the state in a fragile context, Somalia. We rely on…
Taxpayers sometimes engage in complex transactions with uncertain tax treatment, such as mergers, acquisitions, demergers and spin-offs. With the rise of global value chains and proliferation of multinational corporations, these transactions increasingly involve transnational financial arrangements and cross-border dealings, making tax treatment even more uncertain. If improperly structured, such transactions could have costly tax consequences….
Tax amnesties have taken centre stage as a compliance tool in recent years. The OECD estimates that since 2009 tax amnesties in 40 jurisdictions have resulted in the collection of an additional €102 billion in tax revenue. A number of African countries have introduced tax amnesties in the last decade, including Nigeria, Namibia, South Africa…
National tax administrations in sub-Saharan Africa have undergone considerable reform in recent decades. In several respects, they are, on average, more reformed and more efficient than tax administrations in other low-income regions. Many have made major organisational changes, responding effectively to a number of major challenges. This includes the introduction of VAT, a rather complex…
Taxation is high on the international development agenda, largely due to growing evidence that it can not only provide sustainable development funding, but also contribute to expanded responsiveness and accountability in government. This is because: (i) when forced to pay taxes citizens are more likely to feel ownership of government revenues, and demand benefits in…
This paper examines the effect of intergovernmental fiscal transfers on the fiscal behaviour of local governments in Ethiopia for the period 2004-2018. The empirical findings suggest that central government grants bolster state-level employment and expenditure. However, grants from the central government to states do not crowd out state-level revenue collection. Hence, this paper argues that…
There is increasingly strong evidence that taxation can contribute to expanded government responsiveness and accountability. However, such positive connections are not guaranteed. Rather, they are shaped by the political and economic context and specific policies adopted by governments and civil society actors. Without an environment that enables tax bargaining, there is a risk that taxation…
The pandemic is in many ways a crisis of governance. Its magnitude and mitigation are determined by the nature of policy responses and crisis management by leaders and governments, and existing socioeconomic inequality has led to a disproportionate impact on some groups. The pandemic has created a set of unique challenges that underscore the need…
Blogs:
In recent years, the legalisation of cannabis – initially for medical use, and increasingly for recreational use – has become a common policy talking point. But can legalised cannabis production become a new revenue source for low and middle-income countries? Canada and a range of states in the US have made headlines from legalisation initiatives…
What is the connection between taxation and more open societies that the British aid programme aims to support? In long-term historical perspective, it is very close. The societies that enjoy the most open, democratic and accountable government are also those that tax the most – and spend the most on making life better for their…
Informal economies in North Africa have frequently captured public attention in recent years. They not only make up over half of the region’s labour force and a substantive part of its GDP, but often put workers into unsafe environments or in conflict with authorities. While Mohamed Bouazizi’s self-immolation is surely the most famous example, deaths and…
Research Projects:
Since having been declared a global pandemic in March 2020, Covid-19 has altered the daily life of the vast majority of the world population, with major impacts on its health and livelihood. While Sub-Saharan Africa (SSA) was not amongst the first regions to be hit, cases have been reported in all of its countries since…
This inquiry aims to examine the effect of intergovernmental fiscal transfers on fiscal behaviours of local governments in Ethiopia for the period 1992–2018. The empirical analysis shall follow the systems general methods of moments regression technique. The motivation for using this estimation technique is to provide special focus to the issue of endogeneity by estimating…
Taxation is thought to stimulate participation and accountable governance. This project examines how tax collection affects local bureaucrat performance in the DRC. We exploit random variation in whether local bureaucrats known as avenue chiefs were responsible for property tax collection (treatment), or whether agents of the tax ministry collected taxes within chief jurisdictions instead (control)….
The Ferdi will update the legal and tax database country by country. It estimates that the average time needed to update a country is four days. However, it goes without saying that countries that have made major tax reforms will require more time than countries whose laws have not changed. For example, Burkina Faso, which…
This project will explore the scope and size of energy-related tax expenditures in Africa. Tax expenditures (including rate reductions, exemptions and other forms of foregone revenue) can significantly reduce the overall revenue received by African governments. The literature on energy subsidies suggests that energy-related tax expenditures are often among the largest forms of revenue loss….
Project Outputs
Policy Brief
The recent crash in oil prices and subsequent economic crisis has highlighted the grave consequences that are associated with Nigeria’s heavy dependence on oil revenue and its low tax base. While this pattern is well known for the country, there is limited evidence on the state-by-state variation in oil dependence and economic outcomes. This study…