IMF Working Papers

Tax Revenues in Fragile and Conflict-Affected States—Why Are They Low and How Can We Raise Them?

By Bernardin Akitoby, Jiro Honda, Keyra Primus

July 24, 2020

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Bernardin Akitoby, Jiro Honda, and Keyra Primus. Tax Revenues in Fragile and Conflict-Affected States—Why Are They Low and How Can We Raise Them?, (USA: International Monetary Fund, 2020) accessed November 13, 2024

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

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.

Subject: Customs administration core functions, Excises, Revenue administration, Tax administration core functions, Tax collection, Taxes

Keywords: Administration reform, Conflict-Affected States, Country authorities, Customs administration core functions, Customs administration reform, Customs duty, Effectiveness index, Excises, Fragile, Global, Governance issue, Governance variable, Government effectiveness, Income tax, Middle East, Modernization program, Reform effort, Revenue administration reform, Sub-Saharan Africa, Tax administration core functions, Tax administration modernization program, Tax administration reform, Tax collection, Tax reform, Tax reform strategy, Tax Revenue Mobilization, WP

Publication Details

  • Pages:

    43

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2020/143

  • Stock No:

    WPIEA2020143

  • ISBN:

    9781513550848

  • ISSN:

    1018-5941

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