Assessing the efficiency of tax administration in Africa

Abstract

Taxation has been recognised as a proactive tool for achieving fiscal capacity, yet irreconcilable views exist as to why, decades after independence, countries in Africa still face challenges financing their public spending needs. One of the factors that has been studied in recent years is the performance of the institutions responsible for revenue mobilisation. Countries need effective, efficient, and capable tax authorities to mobilise sufficient revenue. This paper uses data from 27 African countries collected by African Tax Administration Forum (ATAF), to assess the efficiency of African tax administrations. It applies parametric (stochastic frontier) and non-parametric (data envelopment) techniques to generate efficiency scores and rank tax administrations. The results suggest that many African tax administrations operate inefficiently and could improve their performance by between 3 and 79% to reach their maximum capacity. Applying the Tobit regression technique shows that the granting of partial autonomy to revenue collection agencies, the size of the informal sector, size of non-tax revenue, and segmentation of taxpayers have significant effects on the efficiency of tax administrations. The paper highlights the importance of determining the level of efficiency and the factors that matter for improving the performance of revenue authorities and building fiscal capacity.

Keywords:

• Tax administration
• efficiency
• domestic revenue
• development
• Africa

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The countries in the sample are: Angola, Mozambique, Botswana, Namibia, Burundi, Niger, Cape Verde, Nigeria, Cameroon, Rwanda, Senegal, Côte d’Ivoire, Seychelles, Eswatini, Sierra Leone, Gambia, South Africa, Ghana, Tanzania, Liberia, Togo, Madagascar, Uganda, Malawi, Zambia, Mauritius, and Zimbabwe.

2 The author was granted permission by ATAF to use the data and received ethical clearance (number 11400) on the use of the data from the University of Stellenbosch.