Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284122 
Year of Publication: 
2023
Series/Report no.: 
CREDIT Research Paper No. 23/05
Publisher: 
The University of Nottingham, Centre for Research in Economic Development and International Trade (CREDIT), Nottingham
Abstract: 
Taxation can contribute to state-building through a tax bargain in which taxpayers are willing to increase compliance in return for improved government accountability. There is limited evidence for this in sub-Saharan Africa (SSA) where it is argued that the fiscal state is weak, with low tax revenues and governments that are not accountable. However, since the early 2000s, SSA countries on average have increased tax/GDP ratios significantly and there have also been increases in measures of accountability. Has the increase in taxation promoted improved accountability? This paper analyses data for up to 47 African countries from 1980 to 2019 and shows a robust positive correlation between tax revenue and accountability. Instrumental variable estimation provides support for a causal interpretation. The effect of taxation is only observed for vertical accountability (capturing the quality of elections and party competition), not for other measures of accountability capturing the role of civil society or the judiciary, consistent with the emergence of a tax bargain. Furthermore, we show that the tax effect is one of the significant determinants of vertical accountability.
Subjects: 
tax revenue
vertical accountability
tax bargain
sub-Saharan Africa
JEL: 
H20
O55
Document Type: 
Working Paper

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