Electricity Provision and Tax Mobilization in Africa
This paper provides evidence on how the provision of social infrastructure, such as reliable electricity, can be leveraged to increase taxation in developing countries, particularly in Sub-Saharan Africa. First, using comprehensive data from the la...
| Main Authors: | , , , |
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| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/456951523908618247/Electricity-provision-and-tax-mobilization-in-Africa http://hdl.handle.net/10986/29710 |
| Summary: | This paper provides evidence on how the
provision of social infrastructure, such as reliable
electricity, can be leveraged to increase taxation in
developing countries, particularly in Sub-Saharan Africa.
First, using comprehensive data from the latest round of the
Afrobarometer survey, the paper uses the instrumental
variable approach to estimate the effect of access to and
reliability of electricity on the tax compliance attitudes
of citizens in 36 countries in Sub-Saharan Africa. The
evidence shows a significant positive effect of
electrification on tax compliance attitudes, with
potentially strong externalities. The analysis also finds
that the reliability of supply is crucial in explaining the
impact of electricity access on attitudes toward taxes.
Second, the paper provides suggestive evidence on national
identity as one channel driving this impact. Access to
social amenities such as electricity induces a sense of
national identity among citizens, thereby incentivizing them
to contribute, through taxes, toward the functioning of the
state. Third, using data from the most recent World Bank
Enterprise Surveys and under conservative assumptions, the
paper estimates that countries in the region could in total
generate additional tax revenues of more than $9.5 billion
(4.3 percent of total tax revenue) per year solely by
resolving issues related to electricity shortages. Put
together, the paper concludes that the financial returns
associated with public investments toward improving access
to and reliability of electricity are substantial and could
be harnessed to augment the financing gap in the sector. |
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