Access-for-all to financial services: Non-resources tax revenue-harnessing opportunities in developing countries

Ali Compaoré

The Quarterly Review of Economics and Finance, 2022, vol. 85, issue C, 236-245

Abstract: Financial inclusion refers to access to and use of formal financial services by individuals and businesses. The importance of access to formal financial networks in enabling positive and significant economic outcomes has been demonstrated in many settings in the literature. In addition, the ongoing COVID-19 pandemic adds further credence to the necessity of unlocking access to basic financial services for more resilience to consumption and investment collapse. In this paper, we particularly investigate the impact of financial inclusion on non-resources tax revenue based on a sample of 63 developing countries over the period 2004–2017. Drawing on the popular dynamic generalized method of moments (GMM), the paper shows that greater access to financial services captured by the number of ATMs per 100,000 adults increases the government non-resources tax-to-GDP ratio. Interestingly, the paper finds that this result is driven by households’ consumption and business expansion. Our findings provide insights on tax resources-harnessing opportunities from implementing and promoting financial inclusion policies for developing economies.

Keywords: Financial inclusion; Non-resource tax-to-GDP ratio; Private consumption; Unemployment; Developing countries (search for similar items in EconPapers)
JEL-codes: G21 H20 O11 O23 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:85:y:2022:i:c:p:236-245

DOI: 10.1016/j.qref.2022.03.007

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