IMF Working Papers

Citizens Perceptions of Tax Authorities and Tax Efficiency

By Telma Yamou, Alun H. Thomas, Kaihao Cai

November 8, 2024

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Format: Chicago

Telma Yamou, Alun H. Thomas, and Kaihao Cai. "Citizens Perceptions of Tax Authorities and Tax Efficiency", IMF Working Papers 2024, 234 (2024), accessed November 22, 2024, https://doi.org/10.5089/9798400292866.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Corporate income tax, Corruption, Crime, Revenue administration, Revenue performance assessment, Tax efficiency, Taxes, Value-added tax

Keywords: Africa, Africa, Corporate income tax, Corruption, Fragility, Tax efficiency, Tax efficiency, Trust in authorities, Value-added tax

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