Tax Administration Capabilities and Revenue Extraction Efficiency in Sub-Saharan Africa: Evidence from a Panel Stochastic Frontier Model
Keywords:
Tax Effort, Tax Administration Capability, Technical Efficiency, Panel Stochastic Frontier ModelAbstract
Using panel data for 42 countries from 1991 to 2019, and applying a panel stochastic frontier model, this study examines the capabilities and efficiency of tax administrations in sub-Saharan Africa (SSA). The estimation results show that macroeconomic variables, aid dependence, and governance structures affect tax efforts. In addition, we find strong evidence that tax revenue extraction efficiency is influenced by the resourcing of tax administrations and the allocation of those resources to core tax administration functions, such as tax audits. Furthermore, technical efficiency is influenced by internal operational efficiency, which tends to reduce revenue collection costs. This implies that the resourcing of the tax administration, the quality of employment, the allocation of human and other resources, the application of technologies (such as mobile payment) in order to simplify tax administration and reduce costs, and staff motivation are equally important when attempting to maximise revenue administration capabilities and efficiency.
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