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Aid and domestic resource mobilization with a focus on Sub-Saharan Africa

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  • Oliver Morrissey

Abstract

Increasing tax revenues in low-income countries is essential to address future development finance requirements. This is particularly important for aid recipients, the focus of this paper. Theory shows that although there are many ways in which aid can have indirect effects on tax revenue, the direct effects arise because aid and tax are alternative sources of revenue and political economy factors influence the choices made by government. Aid may discourage tax effort if viewed as a politically less costly source of revenue. Under different conditions, the policies and reforms associated with aid may increase revenue, through promoting growth, encouraging more efficient tax structures, or supporting reforms to tax administration. While cross-country evidence reveals no systematic pattern, country studies show that aid can be associated with administrative and efficiency reforms to increase tax revenue. The conclusion discusses how aid and donors can promote increasing domestic tax revenue.

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  • Oliver Morrissey, 2015. "Aid and domestic resource mobilization with a focus on Sub-Saharan Africa," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 31(3-4), pages 447-461.
    • Handle: RePEc:oup:oxford:v:31:y:2015:i:3-4:p:447-461.
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    File URL: http://hdl.handle.net/10.1093/oxrep/grv029
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    Cited by:

    1. Harouna Kinda & Abrams M.E. Tagem, 2023. "Double taxation treaties and resource revenue mobilization in developing countries: A neural network approach," WIDER Working Paper Series wp-2023-125, World Institute for Development Economic Research (UNU-WIDER).
    2. Abrams M.E. Tagem, 2017. "The economics and politics of foreign aid and domestic revenue," WIDER Working Paper Series 180, World Institute for Development Economic Research (UNU-WIDER).
    3. Gnangnon, Sèna Kimm & Brun, Jean-François, 2018. "Is the impact of development aid on government revenue sustainable? An empirical assessment," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 311-325.
    4. Ofori, Isaac Kwesi & Obeng, Camara Kwasi & Mwinlaaru, Yeltulme Pter, 2021. "Effect of Exchange Rate Volatility on Tax Revenue Performance In Sub-Saharan Africa," EconStor Preprints 233955, ZBW - Leibniz Information Centre for Economics.
    5. Liu, Feng & Liu, Fengrui & Huang, Jiqiang & Dong, Haoran, 2024. "Aid and national tax capacity: Empirical evidence from Chinese aid," China Economic Review, Elsevier, vol. 85(C).
    6. Bayale, Nimonka, 2020. "Foreign Aid and Fiscal Resources Mobilization in WAEMU Countries: Ambiguous Effects and New Questions," African Journal of Economic Review, African Journal of Economic Review, vol. 8(2), July.
    7. Roel Dom, 2017. "Semi-Autonomous Revenue Authorities in Sub-Saharan Africa: Silver Bullet or White Elephant," Discussion Papers 2017-01, University of Nottingham, CREDIT.
    8. Ali Compaoré & Abrams M.E. Tagem, 2022. "Does aid fragmentation affect tax revenue dynamics in developing countries?: Observations with new tax data," WIDER Working Paper Series wp-2022-99, World Institute for Development Economic Research (UNU-WIDER).
    9. Jose L. Diaz‐Sanchez & Abrams M. E. Tagem & Joana Mota, 2022. "Tax revenue effort and aid in fragile states: The case of Comoros," South African Journal of Economics, Economic Society of South Africa, vol. 90(2), pages 175-195, June.
    10. Romain Houssa & Kelbesa Megersa, 2020. "Capacity Support for Domestic Revenue Mobilization - The case of Belgian development cooperation and partner countries," BeFinD Working Papers 0131, University of Namur, Department of Economics.
    11. Matilde Jeppesen, 2021. "What we hoped for and what we achieved: Tax performance of Semi‐Autonomous Revenue Authorities in sub‐Saharan Africa," Public Administration & Development, Blackwell Publishing, vol. 41(3), pages 115-127, August.
    12. Abrams M E Tagem, 2017. "Aid, Taxes and Government Spending: A Heterogeneous Cointegrated Panel Analysis," Discussion Papers 2017-02, University of Nottingham, CREDIT.

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