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.

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Publications:

Fuel subsidy reform and the social contract in Nigeria: A micro-economic analysis
by Neil McCulloch, Tom Moerenhout & Joonseok Yang

Fuel subsidies in Nigeria are enormous – around USD 3.9 billion – almost double the health budget. Such subsidies come at great cost: the opportunity costs of such spending on other development objectives are large; the distribution of resources to the state governments is reduced; the vast majority of the subsidy goes to better off Nigerians; and…

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July 2021
There and Back Again: The Making of Uganda’s Mobile Money Tax
by Doris Akol & Adrienne Lees

This paper evaluates the appropriateness of the tax policymaking process that led to the introduction, and the later adaptation, of a tax on mobile money transactions in Uganda in 2018. We examine the unusual source of the proposal, how this particular tax diverged from the usual tax policymaking process, and whether certain key stakeholders were…

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Taxation and Customs Reforms in Fragile States: Between Bargaining and Enforcement
by Thomas Cantens & Gael Raballand

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…

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March 2021
Trade Tax Evasion and the Tax Rate: Evidence from Transaction-level Trade Data
by Andualem T Mengistu, Kiflu G Molla & Giulia Mascagni

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…

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March 2021
Explaining Informal Taxation and Revenue Generation: Evidence from south-central Somalia
by Vanessa van den Boogaard & Fabrizio Santoro

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…

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January 2021
Tax Certainty? The Private Rulings Regime in Uganda in Comparative Perspective
by Samuel Kahima, Solomon Rukundo & Victor Phillip Makmot

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….

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Tax Amnesties in Africa: An Analysis of the Voluntary Disclosure Programme in Uganda
by Solomon Rukundo

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…

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December 2020
What is Wrong with African Tax Administration?
by Mick Moore

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…

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December 2020
Strengthening Tax-Accountability Links: Fiscal Transparency and Taxpayer Engagement in Ghana and Sierra Leone
by Vanessa van den Boogaard, Wilson Prichard, Rachel Beach & Fariya Mohiuddin

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…

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The Impact of Intergovernmental Transfers on Fiscal Behaviour of Local Governments in Ethiopia
by Dejene Mamo Bekana

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…

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Blogs:

July 2021
by Jacob Aondohemba Iormbagah

Across Nigeria, a journey through rural communities and interaction with community members will expose you to the prevalence of self-financed and managed community development projects. The benefits of those projects completed through informal taxation to the people of Nigeria cannot be overemphasised, though many scholars and tax administrators are not aware or pay little attention…

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July 2021
by Neil McCulloch

As the G20 Environment Ministers meet today, one of the key issues they need to consider is whether to get serious about fossil fuel subsidy reform. As a report published on June 19 by Bloomberg NEF and Bloomberg Philantropies points out, the G20 countries have provided more than $3.3tn (£2.4tn) in subsidies for fossil fuels…

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June 2021
by Giovanni Occhiali, Max Gallien & Soukayna Remmal

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…

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Research Projects:

Current Project
Taliban Taxation System in Afghanistan
Project Researchers: Rahmatullah Amiri & Ashley Jackson

This project is an exploratory and interpretative piece of research looking at patterns of Taliban taxation to piece together an explanation of their practices. This research is guided by two main, inter-related questions: 1. How and why do the Taliban collect taxes, and how does this vary across areas under Taliban influence? 2. What does…

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Past Project
Fiscal Decentralization and Intergovernmental Fiscal Relations in sub-Saharan Africa: A critical literature survey and perspective for future research
Project Researchers: Ndamsa Dickson Thomas & Mark Wiykiynyuy Tangwa

What is the agenda for future research in the areas of fiscal decentralization and intergovernmental fiscal relations in Cameroon? The specific objectives of this project are as follows: • To conduct a critical literature survey on fiscal decentralization and intergovernmental fiscal relations in sub-Saharan Africa, with a special focus on Cameroon, • To identify knowledge…

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Past Project
Revenue shortfalls from domestic and trade taxes in the wake of COVID: evidence from Eswatini, Rwanda, Uganda, Sierra Leone and South Africa
Project Researchers: Giulia Mascagni, Giovanni Occhiali, Adrienne Lees & Fabrizio Santoro

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…

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Past Project
The impact of intergovernmental transfers on fiscal behaviors of local governments in Ethiopia
Project Researchers: Dejene Mamo Bekana

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…

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Past Project
Tax Collection and Bureaucrat Accountability: Experimental Evidence from the DRC
Project Researchers: Laura Paler, Augustin Bergeron, Gabriel Tourek & Jonathan L Wiegel

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)….

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Past Project
Mining Taxation – Fondation pour les Etudes et Recherches sur le Développement International (FERDI)
Project Researchers: Celine De Quatrebarbes, FERDI

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…

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Past Project
Energy-related Tax Expenditures in Africa
Project Researchers: Dr. Neil McCulloch & Dr. Roel Dom

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
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Past Project
Economic and Political Consequences of Revenue Composition across States in Nigeria
Project Researchers: Oyebola M. Okunogbe

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…

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