Democracy and Taxation: Evidence from African Countries

Abstract

Using a database on fiscal performance from the African Economic Outlook (AEO) for 51 African countries, this article examines the link between regime type and taxation. The existing theoretical and empirical literature on this issue has thus far yielded very contradictory results, and the relationship between regime type and taxation in the African case has not been studied as much, largely because of insufficient data. Yet, the African case is interesting for several reasons. First, many African countries have democratized in the past two decades. At the same time, tax revenue as a percentage of gross domestic product (GDP) has increased, in part due to resource-related tax revenues, and several African countries are already making significant tax effort. There has also been much emphasis in recent years about the need for African countries to mobilize more resources domestically in order to reduce their reliance on external sources. Examining the determinants of taxation and tax structure is thus an important question, which this article attempts to answer. Controlling for various socioeconomic factors, the authors find some evidence of a positive relationship between regime type and taxation, as well as some support for the idea that this relationship varies according to the type of taxes that are considered. Based on the authors’ findings, this article presents some policy recommendations that can strengthen the link between democracy and taxation in African countries.