cover image: Citizens Perceptions of Tax Authorities and Tax Efficiency

Citizens Perceptions of Tax Authorities and Tax Efficiency

8 Nov 2024

This paper examines the relationship between citizens’ perceptions of tax authorities and the governments’ efficiency in collecting VAT and CIT revenues in Africa. Drawing on data from 32 countries over 2014-2019, we find a negative and significant association between negative perceptions of trust in authorities (the tax department) from the Afrobarometer survey and tax efficiency for these revenue categories. A 1 percent increase in the share of citizens’ perception of little or no trust in the tax department leads to a 0.22 percent decrease in VAT tax efficiency, controlling for macroeconomic indicators. The magnitude of the effect is significantly greater in fragile compared to non-fragile states. For corporate income tax productivity focusing on tax payments of corporates we find a significant effect only in fragile states. Perceptions about corruption in tax authorities have a similar effect on VAT and CIT tax efficiency since perceptions about trust and corruption capture the tendency to misappropriate revenues but we are unable to distinguish the two effects except for fragile states. Our findings suggest that in the face of fragility, policies aimed at improving fiscal capacity should place a high importance on ensuring that citizens believe resources will be used properly, an aspect of tax policy not typically prioritized.
africa corruption crime revenue administration taxes corporate income tax value-added tax fragility tax efficiency revenue performance assessment trust in authorities

Authors

Telma Yamou, Alun H. Thomas, Kaihao Cai

DOI
https://doi.org/10.5089/9798400292866.001
ISBN
9798400292866
ISSN
1018-5941
Issue
234
Pages
31
Published in
United States of America
Series
Working Paper No. 2024/234
StockNumber
WPIEA2024234
Volume
2024

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