Tax Buoyancy in Sub-Saharan Africa and its Determinants

Sanjeev Gupta (), Joao Jalles and Jianhong Liu ()
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Sanjeev Gupta: Center for Global Development
Jianhong Liu: Center for Global Development

International Tax and Public Finance, 2022, vol. 29, issue 4, No 4, 890-921

Abstract: Abstract In this paper, we estimate short- and long-term tax buoyancy for 44 sub-Saharan African (SSA) countries during 1980–2017 using time series and panel techniques. We find that the long-term tax buoyancy is either one or slightly above one for most SSA countries. Fragile states have a lower short-term tax buoyancy reflecting their institutional weaknesses. Short-term buoyancy of personal income tax is significantly less than one. Both short- and long-run tax responses are lower than those reported in previous cross-country studies, which can be interpreted as a reduced power of both automatic stabilization in the short run and fiscal sustainability in the long run. We find that central government debt and shadow economy exert a downward pressure on tax buoyancy. An important implication of these results is that the current tax systems in SSA would not be able to generate domestic revenues to the extent needed for financing the Sustainable Development Goals (SDGs).

Keywords: Tax buoyancy; Sustainable Development Goals; Error Correction Model; Sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: E62 H20 H24 H25 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10797-021-09694-x

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