Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248375 
Year of Publication: 
2021
Series/Report no.: 
WIDER Working Paper No. 2021/161
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
There is limited research on the underlying institutional framework of tax policy and capacity: how tax collection efficiency changes over time and the importance of institutional factors in this process. This paper fills this gap by devising a measure of tax capacity distinct from commonly used measures of tax effort based on residuals from a tax performance (tax/gross domestic product ratio) regression. The paper uses annual data on 44 sub-Saharan African countries covering the period from 1980 to 2018. The empirical strategy separating performance from underlying fiscal capacity proceeds in three steps: estimating standard tax performance regressions, from which we generate measures of potential and actual tax revenue; decomposing the actual-to-potential tax revenue ratio to use the trend component as a measure of tax capacity; and applying general-to-specific analysis with a wide variety of economic and institutional variables as potential determinants of tax capacity to identify the most important correlates.
Subjects: 
tax capacity
tax performance
general-to-specific
institutional variables
JEL: 
C23
H20
O23
O43
Persistent Identifier of the first edition: 
ISBN: 
978-92-9267-101-3
Document Type: 
Working Paper

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