Open AccessHeterogeneous Effects of Financial Development on Tax Revenues: Accounting for Institutional Quality in Sub-Saharan Africa
Author(s) -
Sieni Toussaint. OULAI
Publication year - 2022
Publication title -
applied economics and finance
Language(s) - English
Resource type - Journals
eISSN - 2332-7308
pISSN - 2332-7294
DOI - 10.11114/aef.v9i1.5468
Subject(s) - tax revenue , revenue , finance , tax reform , business , economics , tax credit , value added tax , ad valorem tax , financial system , monetary economics , public economics
Several studies have shown that financial development improves efforts to increase the tax base and tax revenue through different channels. This paper analyzes the effect of financial development on tax revenue conditional on institutional quality for a panel of developing countries over the period 1990-2019. Using a threshold approach, the results indicate that the influence of financial development on non-cash tax receipts is not monotonic and is sensitive to level of institutions. Financial development improves the tax base and tax revenue when the quality of institutions is better. The results point out as well heterogeneousness across countries and over the years counts. Estimates with financial market index confirm the evidence that countries that benefit most from increased tax revenues are those that improve their institutional quality.