Tax Revenues and Income Inequality in Sub-Saharan Africa: Evidence from a Dynamic Panel Threshold Analysis.

Abstract

The main goal of this paper is to revisit the relationship between tax revenues and income inequality in 28 Sub-Saharan countries from 2000 to 2015. Applying a dynamic panel threshold model, the results find that that there is a nonlinearity link between both variables and an optimal tax revenue rate affecting income inequalities. More specifically, the optimal tax revenue rate is around 1.051%. Below this threshold, an increase of 1 percent in tax revenue rises income inequality by 0.017% and beyond this threshold, an increase of 1 percent in tax revenue reduces income inequality by 0.026%. by remaining below the optimal threshold, the authorities deprive themselves of a broadening of the tax base, lever in the fight against inequalities and poverty. Code JEL : C36, E62, 023.