Lund Papers in Economic History,
Lund University, Department of Economic History

Abstract: Domestic revenue mobilization continues to feature on the agendas of international development agents and academic communities. There is, however, a strong focus on comparing the developed and developing countries with the aim of finding transferable lessons to the latter. Thus, most comparative studies default to comparing tax performances of developing countries with OECD averages. Interregional peer-to-peer or context-sensitive comparisons remain relatively unexplored. This paper compares the Sub-Saharan African countries (SSA) with the Latin American & Caribbean countries (LAC) since 1980. The paper focuses on tax efforts, revenue volatility and a context-sensitive analysis of the determinants of tax revenues. Using fiscal data from the International Centre for Tax and Development (ICTD), the world development indicators (WDI) and other publicly available datasets, the paper finds that although the LAC countries are performing better on tax collection, they lag behind the SSA countries on tax efforts. Revenue volatility is higher on average for the SSA countries than for the LAC countries. By implementing a panel framework of 83 countries from both regions, the paper finds that the standard tax determinants behave as theoretically expected but only for the upper-middle-income countries that are relatively developed. The implication for policy is that custom-built and second-best reforms are more appropriate for the poorer countries than any ‘best practice’ from the developed regions.

Keywords: fiscal capacity; taxation; Sub-Saharan Africa; Latin America; tax effort; revenue volatility; public revenues; developing regions; comparative analysis

JEL-codes: H20; H24; H27; N46; N47

39 pages, November 14, 2019

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