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Tax Revenues in Fragile and Conflict-Affected States—Why Are They Low and How Can We Raise Them?
Author:
Mr. Bernardin Akitoby
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,
Mr. Jiro Honda
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, and
Keyra Primus
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Series:
IMF Working Papers
Volume/Issue:
Volume 2020: Issue 143
Language:
English
Publication Date:
24 Jul 2020
DOI:
https://doi.org/10.5089/9781513550848.001
ISBN:
9781513550848
ISSN:
1018-5941
Pages:
43
Keywords:
WP; customs administration reform; reform effort; modernization program; governance issue; revenue administration reform; tax administration modernization program; income tax; tax reform; country authorities; tax administration reform; customs duty; tax reform strategy; governance variable; effectiveness index; Tax administration core functions; Tax collection; Customs administration core functions; Excises; Middle East; Sub-Saharan Africa; Global; Tax Revenue Mobilization; Fragile; Conflict-Affected States; government effectiveness; administration reform
Legal-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.
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Raising revenues has been a formidable challenge for fragile and conflict-affected states (FCS), a fact confirmed once again in the COVID-19 crisis. Nonetheless, achieving sizable gains in tax collection in fragile environments is not impossible. This paper—with empirical analyses and case studies—contributes to policy discussions on tax reform in such challenging environments. Our analyses show that many FCS achieved some recovery of tax revenues, even though they found it challenging to sustain the momentum beyond three years. We also find that changes in the quality of institutions (e.g., government effectiveness and control of corruption) are a key contributory factor to their tax performance (much more so than for non-FCS). Next, we look into the tax increase episodes of four countries (Liberia, Malawi, Nepal, and the Solomon Islands). Although each FCS is unique, their experiences suggest two lessons: (i) tax reforms can be pursued even with initially weak institutions; and (ii) strong political commitment is important to sustain reform efforts and realize long-lasting, sizable gains.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund