Does Conditionality Mitigate the Potential Negative Effect of Aid on Revenues?

July 21, 2016

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Ernesto Crivelli, and Sanjeev Gupta. Does Conditionality Mitigate the Potential Negative Effect of Aid on Revenues?, (USA: International Monetary Fund, 2016) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper assesses whether conditionality in IMF-supported programs has helped offset the potential negative effect of foreign aid on tax revenues. The analysis—carried out on panel data covering 1993–2012 for 111 low- and middle-income countries—shows that growing use of revenue conditionality by low-income countries partially offsets the depressing effect of foreign grants on tax revenue, particularly on taxes on goods and services. The impact of conditionality is strong in countries where aid dependence is high and where institutions are strong, suggesting that revenue conditionality cannot substitute for weak institutions in mitigating the negative effect of aid on tax revenue collection.

Subject: Consumption taxes, Income and capital gains taxes, National accounts, Personal income, Revenue administration, Tax collection, Taxes

Keywords: Aid-tax revenue relationship, Collection to ODA and conditionality, Conditionality dummy, Conditionality in fund program, Conditionality variable, Consumption taxes, Extent revenue conditionality in IMF program, Foreign aid, IMF database, Income and capital gains taxes, ODA, ODA grant, Personal income, Revenue, Revenue conditionality, Revenue dataset, Revenue statistics, Structural conditionality, Sub-Saharan Africa, Tax, Tax collection, Tax revenue collection, Tax revenue reform, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/142
Stock No:

WPIEA2016142
ISBN:

9781498379847
ISSN:

1018-5941

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