Efficiency of tax revenue administration in Africa

Achieving stable domestic tax revenue allows countries to finance their essential spending needs. For most countries in Africa, enhancing tax revenue is critical for sustainable development. To build up fiscal capacity, country experiences suggest the importance of tax administration reforms that aim at improving the performance of these institutions. Despite its importance, empirical literature on tax administration is limited, especially in Africa. Lack of comparable tax administrative data explains the scant literature. However, the African Tax Administration Forum (ATAF) has compiled a dataset for African countries which makes empirical analysis possible. The paper makes use of this administrative dataset available for 28 African countries for the 2012 - 2017 period to investigate the efficiency of tax administration in Africa. It applies Data Envelopment Analysis (DEA), Stochastic Frontier Analysis (SFA) and Tobit regression to analyse efficiency scores, rank tax administrations and explore the factors that matter. Among the findings, the paper indicates minimal variation in efficiency across the African tax administrations and significant impact of the size of the informal sector, size of non-tax revenue, employee length of service and autonomy of the tax administration.

D24, H20

Tax administration, Efficiency, Domestic revenue, Development