Semi-autonomous revenue authorities in sub-Saharan Africa: silver bullet or white elephant?

Roel Dom

Roel Dom published one of the chapters of his PhD thesis at our school in the Journal of Development Studies. He studies whether the shift to semi-autonomous revenue administrations has increased revenue collection in sub-Saharan Africa.

A major component of tax administration reform in sub-Saharan Africa over the last thirty years has been the creation of semi-autonomous revenue authorities (SARAs). As opposed to conventional tax administration, SARAs operate at arm’s length from the ministry of finance. This ring-fencing of tax collection from political interference is supposed to improve tax compliance and collection compared to conventional tax administrations. By handing control over to an independent authority, governments can signal a credible commitment to a fairer and less discretionary collection process that should boost compliance. In addition, increases in human resources, budget, organisational and financial autonomy might create the managerial space and flexibility needed to overcome rigid civil service structures, allowing the administration to operate more effectively.

Earlier research on SARAs suggested a positive revenue effect, but it ignored the revenue dip preceding the reform, as SARAs were often introduced following a revenue crisis. Taking into account revenue dynamics (incorporating these pre-reform revenue shocks), the results in this article fail to provide any evidence of a systematic relationship between the presence of a SARA and total tax revenue in sub-Saharan Africa. When past revenue is included in the estimations, the effect of SARAs on revenue drops markedly and becomes insignificant. This pattern remains unchanged across different estimations with varying specifications, and when performing an array of robustness checks. This conclusion also holds when going beyond the total revenue effect by looking at direct, goods and services, and trade taxation. Moreover, an instrumental variable estimation confirms the baseline finding: on average SARAs have not increased revenue performance across sub-Saharan Africa. While SARAs may have provided benefits for tax administration this has not been reflected in significant increases in tax/GDP ratios.

Dom, R. (Forthcoming). Journal of Development Studies. "Semi-Autonomous Revenue Authorities in sub-Saharan Africa: Silver Bullet or White Elephant?"

An earlier version of the paper is available as a CREDIT Research Paper (PDF).

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