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How much more can the tax administration collect? Measuring tax potential for Senegal

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  • Diagne, Youssoupha Sakrya
  • Ba, Arona

Abstract

This paper measures tax potential in Senegal. The tax revenue structure shows a strong reliance on indirect taxes collected from foreign trade which is progressively declining thanks to trade liberalization reforms. A stochastic frontier model is used to compute the distance to potential for the main taxes. Results show that the overall tax revenue could be improved by 10.2 percentage points corresponding to a tax potential of 25.3% of GDP for Senegal. Furthermore, the income tax collection is the most distant from its potential and therefore its share in percentage of GDP can still be increased by 7.2 percentage point. However, the best performing tax is non-oil tariffs which only need a 0.2 percentage point increase to reach its potential

Suggested Citation

  • Diagne, Youssoupha Sakrya & Ba, Arona, 2019. "How much more can the tax administration collect? Measuring tax potential for Senegal," MPRA Paper 114168, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:114168
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    References listed on IDEAS

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    3. Keith Walsh, 2012. "Understanding Taxpayer Behaviour – New Opportunities for Tax Administration," The Economic and Social Review, Economic and Social Studies, vol. 43(3), pages 451-475.
    4. Schmidt, Peter, 1976. "On the Statistical Estimation of Parametric Frontier Production Functions," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 238-239, May.
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    More about this item

    Keywords

    tax frontier; tax capacity; tax revenue; tax effort; stochastic tax frontier; inefficiency;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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