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Building fiscal capacity in developing countries: Evidence on the role of information technology

Merima Ali, Abdulaziz B. Shifa, Abebe Abebe and Firew Woldeyes

No 12, CMI Working Papers from CMI (Chr. Michelsen Institute), Bergen, Norway

Abstract: Limited fiscal capacity poses a significant challenge in developing countries. To mitigate this challenge, the adoption of electronic tax systems has been at the forefront of tax reforms; however, there is little systematic empirical evidence on the impact of such reforms. We attempt to narrow this gap by documenting evidence from Ethiopia where there has been a recent surge in the use of electronic sales registry machines (ESRMs). Using administrative data covering all business taxpayers, we find that ESRM use resulted in a large and significant increase in tax payments. Moreover, this effect is driven by firms that were more likely to evade taxes prior to ESRM use. The results highlight the potential role that information technology may play in strengthening state fiscal capacity in developing countries.

Keywords: Developing economy; fiscal capacity; information technology; taxation. (search for similar items in EconPapers)
Pages: pages
Date: 2015
New Economics Papers: this item is included in nep-iue and nep-pay
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Journal Article: Building Fiscal Capacity in Developing Countries: Evidence on the Role of Information Technology (2021) Downloads
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