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This paper explores the relationship between tax rates and tax evasion in a low-income country context: Ethiopia. By using transaction-level administrative trade data, we are able to provide an analysis that is largely comparable with the rest of the literature while also introducing two important innovations. First, we compare the elasticity of evasion to statutory tax rates and effective tax rates (ETRs). Most studies in the literature so far focused on the former. We show that ETRs are the most relevant parameter to explain evasion in contexts where exemptions are widespread, which results in a large divergence between ETRs and the statutory rates set out in the law. Second, we account for trade costs more precisely than the previous literature by adjusting the trade gap rather than controlling for proxies. We argue that this new approach to accounting for trade costs is superior to those previously adopted in the literature.

BackgroundAccess to health facilities in many low-income and middle-income countries remains low, with a strong association between individuals’ distance to facilities and health outcomes. Yet plausibly causal estimates of the effects of facility construction programmes are rare. Starting in 2004, more than 2800 government health facilities were built in Ethiopia. This study estimates the impact of this programme on maternal health service utilisation and birth outcomes.MethodsWe analyse the impact of Ethiopia’s health centre construction programme on health service utilisation and outcomes, using a difference-in-difference design. We match facility opening years to child birth years in four rounds of Demographic and Health Surveys (DHS) using georeferenced data. We also use event study models to test for pre-trends in the outcomes of interest.ResultsOpening of new health facilities within 5 km increases facility delivery by 7.2 percentage points (95% CI 5.2 to 9.1) and antenatal care by 0.38 visits (95% CI 0.24 to 0.52). It is not significantly associated with changes in caesarean section births or neonatal mortality. Opening of district hospitals increases facility delivery by 18.2 percentage points (95% CI 12.7 to 23.7), and caesarean section births by 6.8 percentage points (95% CI 2.5 to 11.2), but is not associated with reduction of neonatal mortality.ConclusionsEthiopia’s facility construction program improved access to antenatal and delivery care. However, there was no detectable association between facility construction and neonatal mortality. Increased access to care must be combined with health system quality improvements and broader social development initiatives to sustainably improve health outcomes.

The literature on Effective Tax Rates (ETRs) focuses on high‐ and middle‐income countries, but there is very little evidence on low‐income countries. This article addresses this gap with new evidence from Ethiopia. We investigate corporate ETRs in Ethiopia and whether the distributional effects they have in practice are in line with the corporate tax policy design. We calculate ETRs in line with the literature in this field, using profit tax at the numerator and gross profit at the denominator. We then analyse ETRs not only using panel data, focusing particularly on their relation to firm size, but also including other explanatory variables. Our main result is that, despite a proportional tax rate, small firms face a higher effective tax burden than larger firms, while middle‐sized firms face the lowest burden of all. We highlight that tax systems can have practical implications that differ largely from their policy design, due to compliance costs and imperfect enforcement. Measures to reduce compliance costs for small firms are particularly recommended.