Tax Revenue Instability in Sub-Saharan Africa: Consequences and Remedies

Christian Hubert Ebeke (1) , Hélène Ehrhart (1)

1 CERDI - Centre d'Études et de Recherches sur le Développement International

This paper focuses on the sources and consequences of the instability of tax revenue in Sub-Saharan African countries. We take advantage of a unique and extraordinarily rich dataset on the composition of tax revenues for a large number of countries. Using panel data for 39 countries observed over the period 1980-2005, our results are threefold. Firstly, the instability of government tax revenue leads to an instability of both the public investment and government consumption, and finally, reduces the level of public investment. Secondly, foreign aid inflows appear to be an effective insurance mechanism against the instability of tax revenue by lowering the sensitivity of public investment with respect to tax revenue shocks. Finally, the reliance on domestic indirect taxation-based systems seems more stabilizing than the dependency on trade tax revenue.

Mots clés: foreign aid; Sub-Saharan Africa; Tax Instability; Tax Composition; public spending

Domaines: Economies et finances

Christian Hubert Ebeke, Hélène Ehrhart. Tax Revenue Instability in Sub-Saharan Africa: Consequences and Remedies. 2011. ⟨halshs-00552230⟩