On the efficiency consequences of tax transition reform: The case of WAEMU countries

Does the revenue replacement strategy of border taxes with domestic revenue collection increase efficiency in collecting revenues in developing countries? This paper attempted to answer the question, by assessing the efficiency consequences of announcing a tax transition reform program in West African Economic and Monetary Union Countries (WAEMU). Through impact evaluation framework with propensity score and synthetic control, we find that, the announcement of this reform increases efficiency in mobilizing resources at WAEMU level as compared to their counterfactual. Efficient mobilization of resources increases by near 4% around the reform agenda, and is achieved 3 years following the announcement of the reform. We also find that the reform improves tax oriented doing business indicators at the community level, by increasing the contribution rate score of firms by 22 scales and reducing collection time scores by 4 scales as compared to the best doing business practices on these indicators. The paper also evidenced that the reform is overall working through tax discipline rather than tax morale channel in these countries. Furthermore, having implemented semi-autonomous revenue agency (SARA) and adopted value-added tax (VAT) prior to the reform, fosters the revenue efficiency increasing effect of the reform, while the effect of adopting large taxpayers' units (LTU) is found to be inconclusive.