Finance for development has received growing attention in recent years. While there have been administrative reforms to improve the efficiency of tax collection, achievements in increasingtax revenue (as a share of GDP) have been rather slow in low-income countries.Resource rich countries seeking to regulate extractive industries face the specific combined challenges of constraints on administrative capacity and the prospect of rent-seeking behavior among political elites.
Increasing tax revenues is a major challenge for sub-Saharan Africa (SSA): in 2014 median domestic revenue was 18.5% of GDP, an increase from 16.6% over 2004-08; for SSA low-income countries in 2014 mean domestic revenue was 16% of GDP (13% over 2004-08). There is variation, across countries and over time: resource-rich countries had higher revenues (from resource rents) when commodity prices were high, but these are now declining. Although, from petroleum exploration off the coast of Tanzania to mineral extraction in the Democratic Republic of the Congo, natural resource wealth is an important source of fiscal revenue for African governments, like resource-poor countries they have to rely increasingly on non-resource tax revenues that have proved more difficult to increase.
The absence of tax structure reforms is not the reason for slow improvements in revenues as many reforms have been implemented, to a greater or lesser extent, over the past 30 years. Some reforms may have had short-run effects of reducing revenues, such as trade liberalization, but other reforms, such as introducing a Value Added Tax (VAT) or establishing semi-autonomous Revenue Authorities (SARAs) or large taxpayer units, were expected to increase revenues fairly quickly but the evidence of effectiveness is mixed. Economic conditions are certainly important, and typically tax revenue increases as a share of GDP if the private sector is growing, but political conditions are equally important, both in limiting the extent of reform and permitting governments to circumvent the intent.
Whilst it is true that a growing body of academic research addresses resource taxation and the political economy of tax reforms in developing countries, important gaps in the evidence base remain. These refer, for instance, to: the impact of taxation and specific tax types on inequality and poverty (about which surprisingly little evidence exists for Africa); the impact of specific institutional solutions on the behaviour of tax authorities and taxpayers; the incentive structures influencing subnational taxation (in particular, property taxation);and the formal and informal regulation of cross-border flows of natural resource wealth and how this relates to challenges of establishing appropriate taxation regimes in African countries.
To stimulate debate and contributions on these issues, the convenors will issue a call for papers to scholars working on taxation in SSA countries. Papers should refer to one or several of the research gaps mentioned above. Preferences will be given to papers that use new methods and data and consider both economic and political factors. The convenors will ensure gender representation and that at least one of the four papers comprising the panel will be by researchers from the global south (or they will be associated as co-authors of papers).
Research Professor, Norwegian Institute of International Affairs
Senior Researcher, Chr. Michelsen Institute
Professor, African Tax Institute
Christian von Haldenwang
German Development Institute
School of Economics, University of Nottingham