The revenue efficiency consequences of the announcement of a tax transition reform: The case of WAEMU countries

Abstract

Does the revenue replacement strategy of border taxes with domestic revenue collection (tax transition) increase efficiency in collecting revenues in developing countries? This article attempted to answer the question, by assessing the efficiency consequences of announcing a tax transition reform program in West African Economic and Monetary Union (WAEMU) countries. Through an impact evaluation framework with propensity score matching and synthetic control method, we find that the announcement of this reform in WAEMU countries increases efficiency in mobilizing resources at the community level as compared to their counterfactual. Efficient mobilization of resources increases by 4.3% around the reform agenda and is achieved 3 years following the announcement of the reform in these countries. We also find that the achieved efficiency in mobilizing resources goes hand in hand with an improvement in tax‐oriented Doing Business indicators at the community level, by increasing the contribution rate score of firms by near 22 scales and reducing collection time scores by 4.2 scales as compared to the best Doing Business practices on these indicators. The article also evidenced that the reform is overall working through the tax discipline channel rather than tax morale in these countries. Furthermore, having adopted value added tax (VAT), implemented semi‐autonomous revenue agencies (SARAs) and large taxpayers' units (LTUs) contribute to foster the revenue efficiency effect of the reform in above‐mentioned countries.

Understanding tax payment behaviour in the West African Economic and Monetary Union: The role of perceived detection capacity and honesty

“…Using a fixed‐effects panel model with instrumental variables, he finds that multilateral aid affects tax revenues positively while bilateral aid does not. Adandohoin and Gammadigbe (2022) examine the efficiency consequences of announcing a tax transition reform program in the WAEMU. Using propensity score matching and synthetic control method, they find that the announcement of this reform in the WAEMU increases efficiency in mobilising resources at the community level by 4.3% around the reform agenda.…”

“…Firstly, the paper contributes to the literature by providing, for the first time to the best of our knowledge, evidence on the behavioural aspects of tax compliance in the WAEMU. Bayale (2020) and Adandohoin and Gammadigbe (2022) recently examined, respectively, the effect of different types of foreign aid on tax revenue and the efficiency consequences of announcing a tax transition reform program in the WAEMU. Ihuarulam et al (2021) investigate how tax revenue is related to selected macroeconomic variables in West Africa.…”

Digitalization of revenue mobilization in an emerging economy: the new Institutional Theory perspective

“…Many of the studies revealed that technological issues [16] and the unavailability of infrastructure [3], [18] were barriers to the successful use of digitalized systems. Other studies also emphasized an increase in cost and financial constraints as a hindrance to successful digitalization [14], [19]. Other issues are individually based, such as poor attitudes towards digitalization, lack of required ICT skills and technical know-how, and individual characteristics [18].…”

“…The goal of building end-user capacity to use the digital platform effectively and efficiently influenced the meeting of specific normative standard requirements. This was necessary because of the transition from erstwhile systems to the use of an integrated system which is noted in studies as an aid for the use of information systems [3], [18], [19]. Training end-users on the use of the system was a standard requirement which led to the effective use of the system.…”