Sage Journals: Discover world-class research

Abstract

In 2006, the countries of the West African Economic and Monetary Union (WAEMU) initiated a fiscal transition program which consists mainly of replacing the loss of customs revenues, as a result of regional integration and trade opening policies, with domestic taxation. After several years of implementation of this tax reform, this study assesses its effects on the countries’ budget deficits. The study uses a fixed effects panel model. The results of the estimations suggest that the reform has had positive effects on the countries’ fiscal deficits through an improvement in the collection of tax resources. The study found a slight deterioration in the structural fiscal deficits of the countries, linked to an increase in public spending in a context of sovereign debt relief and major economic and security challenges. In addition, the level of financial development and the decline in the size of the informal sector of economies played a significant role in revenue collection and fiscal deficit financing. Finally, the study identified a threshold of 13 percent below which the decline in customs revenues as a result of more open trade policies would negatively affect the level of total tax revenue and, in turn, the fiscal deficit. These results lead to policy recommendations.

Keywords

Domestic taxation doorstep taxation fiscal transition fiscal deficit

Get full access to this article

View all access options for this article.

References

Abbas

S. A.

Bouhga-Hagbe

Fatás

Mauro

Velloso

R. C.

. 2011. “Fiscal Policy and the Current Account.” IMF Economic Review 59 (4): 603–629. https://doi.org/10.1057/imfer.2011.22.

Adandohoin

2021. “Tax Transition in Developing Countries: Do Value Added tax and Excises Really Work?” International Economics and Economic Policy 8: 379–424. https://doi.org/10.1007/s10368-021-00492-8.

Adandohoin

Gammadigbe

. 2022. “On the Revenue Efficiency Consequences of tax Transition Reform: The Case of WAEMU Countries.” African Development Review 34: S195–S218. https://doi.org/10.1111/1467-8268.12654.

Adhikari

2015. “When does introducing a value-added tax increase economic efficiency? Evidence from the synthetic control method.” Technical report. Tulane University Working Paper 1524.

Agbodji

A. E.

2007. “Intégration et échanges Commerciaux Intra Sous Régionaux : Le cas de l’UEMOA.” Revue Africaine de L’intégration 1 (1): 161–188.

Aizenman

Jinjarak

. 2008. “The Collection Efficiency of the Value Added Tax: Theory and International Evidence.” The Journal of International Trade and Economic Development 17 (3): 391–410. https://doi.org/10.1080/09638190802137059.

Aizenman

Jinjarak

. 2009. “Globalisation and Developing Countries - A Shrinking tax Base?” The Journal of Development Studies 45 (5): 653–671. https://doi.org/10.1080/00220380802582338.

Alesina

Perotti

. 1996. “Income Distribution, Political Instability, and Investment.” European Economic Review 40 (6): 1203–1228. https://doi.org/10.1016/0014-2921(95)00030-5.

Ameganvi

2020. “Chocs économiques et soutenabilité de la dette publique des états membres de l’UEMOA: nouvelle approche basée sur la capacité de remboursement.” Document d’Etude et de Recherche No COFEB/DER/2020/05, BCEAO.

10.

Attila

Chambas

Combes

J.-L.

. 2011. “Aide publique au développement et transition ﬁscale.” Etudes et documents, E 2009.01, CERDI.

11.

Auriol

Warlters

. 2011. “The Marginal Cost of Public Funds and tax Reform in Africa.” Journal of Development Economics 97 (1): 58–72. https://doi.org/10.1016/j.jdeveco.2011.01.003.

12.

Barro

R. J.

1979. “On the Determination of the Public Debt.” Journal of Political Economy 87 (5): 940–971. https://doi.org/10.1086/260807.

13.

Bassole

B. T.

2011. “Prélèvement Public et Effort Fiscal au Sein de L’Union Economique et Monétaire Ouest Africaine (UEMOA).” Revue Africaine de L’Intégration 5 (1): 100–117.

14.

Baunsgaard

Keen

. 2005. Tax Revenue and (or) Trade Liberalization.” IMF Working Paper, WP/05/112.

15.

Baunsgaard

Keen

. 2010. “Tax Revenue and (or ?) Trade Liberalization.” Journal of Public Economics 94: 563–577. https://doi.org/10.1016/j.jpubeco.2009.11.007.

16.

Bayale

Tchila

Yao

J.-P. A.

Tenakoua

. 2022. “Do tax Administration Reforms Improve tax Revenue Performance in Togo? Empirical Insights from Experimental Approaches.” South African Journal of Economics 90 (2): 196–213. https://doi.org/10.1111/saje.12316.

17.

Bénassy-Quéré

Coeuré

Jacquet

Pisani-Ferry

. 2017. Politique économique, Ouverture économique 4ième Edition.

18.

Benfratello

Monte

A. D.

Pennacchio

. 2018. “Corruption and Public Debt: A Cross-Country Analysis.” Applied Economics Letters 25 (5): 340–344. https://doi.org/10.1080/13504851.2017.1321831.

19.

Bhuiyan

S. H.

2011. “Modernizing Bangladesh Public Administration Through e-Governance: Beneﬁts and Challenges.” Government Information Quarterly 28 (1): 54–65. https://doi.org/10.1016/j.giq.2010.04.006.

20.

Bird

2010. Smart tax administration, Economic Premise. Vol. 36, 1–5. Washington, DC: World Bank.

21.

Bird

Gendron

P.-P.

. 2007. The VAT in developing and transitional countries. Cambridge, UK: Cambridge University Press.

22.

Bird

Martinez-Vazquez

Torgler

. 2008. “Tax Effort in Developing Countries and High-Income Countries: The Impact of Corruption, Voice and Accountability.” Economic Analysis and Policy 38 (1): 55–71. https://doi.org/10.1016/S0313-5926(08)50006-3.

23.

Bleaney

Y. M.

Gemmel

Greenaway

. 1995. “Tax Revenue Instability, with Particular Reference to Sub-Saharan Africa.” The Journal of Development Studies 31: 883–902. https://doi.org/10.1080/00220389508422395.

24.

Bluedorn

Leigh

. 2011. “Revisiting the Twin Deficits Hypothesis: The Effect of Fiscal Consolidation on the Current Account.” IMF Economic Review 59 (4): 582–602. https://doi.org/10.1057/imfer.2011.21.

25.

Bodin

J.-P.

2012. “Modernizing the Tax Administration in Developing Countries : Impact of the VAT.” Revue D’économie du Développement 20 (3): 83–103. https://doi.org/10.3917/edd.263.0083.

26.

Cette

Jaillet

. 1998. L’évaluation du Policy-mix : du bon usage de quelques indicateurs, Note de banque de France, miméo, Janvier.

27.

Chambas

2005. “Afrique au sud du Sahara : Quelle Stratégie de Transition ﬁscale?” Afrique Contemporaine 213 (1): 133–163. https://doi.org/10.3917/afco.213.0133.

28.

Combes

J.-L.

Saadi-Sedik

. 2006. “How Does Trade Openness Influence Budget Deficits in Developing Countries?” Journal of Development Studies 42 (8): 1401–1416. https://doi.org/10.1080/00220380600930762.

29.

Darrat

A. F.

2002. “Budget Balance Through Spending Cuts or Tax Adjustments?” Contemporary Economic Policy 20 (3): 221–233. https://doi.org/10.1093/cep/20.3.221.

30.

De Haan

Jong-A-Pin

Mierau

J. O.

. 2013. “Do Budgetary Institutions Mitigate the Common Pool Problem? New Empirical Evidence for the EU.” Public Choice 156 (3–4): 423–441. https://doi.org/10.1007/s11127-012-9949-5.

31.

Diakite

Brun

J.-F.

Diarra

Tanimoune

N. A.

. 2017. “The effects of tax coordination on the tax revenue mobilization in West African Economic and Monetary Union (WAEMU).” Etudes et docuemnts, N° 12, CERDI.

32.

Diamond

P. A.

Mirrlees

J. A.

. 1971. “Optimal Taxation and Public Production: Tax Rules.” The American Economic Review 61 (3): 261–278. http://www.jstor.org/stable/1813425.

33.

Dixit

1985. “Tax Policy in Open Economies.” In Handbook of Public Economics, edited by Aeurbach

A. J.

Feldstein

. Vol. 1, 313–374. Amsterdam: Elsevier Science Publishers B.V.

34.

Ebeke

Ehrhart

. 2011. “Tax Revenue Instability in Sub-Saharan Africa: Consequences and Remedies.” Journal of African Economies 21 (1): 1–27. https://doi.org/10.1093/jae/ejr026.

35.

Ebeke

C. H.

Ehrhart

. 2012. Does VAT reduce the instability of tax revenues? Etudes et documents E 2014.24, CERDI.

36.

Edwards

Tabellini

. 1991. “Explaining Fiscal Policies and Inflation in Developing Countries.” Journal of International Money and Finance 10: S16–S48. https://doi.org/10.1016/0261-5606(91)90045-L.

37.

Emran

M. S.

Stiglitz

J. E.

. 2000. Vat versus trade taxes: The (in) efficiency of indirect tax reform in developing countries. Washington, DC: Mimeo, Stanford University and Brookings Institution, Washington, DC.

38.

Emran

M. S.

Stiglitz

J. E.

. 2005. “On Selective Indirect tax Reform in Developing Countries.” Journal of Public Economics 89: 599–623. https://doi.org/10.1016/j.jpubeco.2004.04.007.

39.

Evans

2003. “Studying the Studies: An Overview of Recent Research into Taxation Operation Costs.” eJournal of Tax Research 1 (1): 64–92.

40.

Ewing

Payne

. 1998. “Government Revenue-Expenditure Nexus: Evidence from Latin America.” Journal of Economic Development 23 (2): 57–69.

41.

Friedman

1978. “The Limitations of Tax Limitation.” Quadrant 22 (8): 22–24. https://search.informit.org/doi/10.3316/informit.148513023132864.

42.

Garcia

Verdelhan

. 2001. “Le policy-mix de la zone euro : une évaluation de l’impact des chocs monétaires et budgétaires.” Économie et Prévision, No 148, 2001/02.

43.

Gnimassoun

Do Santos

. 2020. “Robust Structural Determinants of Public Deficits in Developing Countries.” Applied Economics 53 (9): 1052–1076. https://doi.org/10.1080/00036846.2020.1824063.

44.

Gordon

R. H.

Nielsen

S. B.

. 1997. “Tax Evasion in an Open Economy: Value-Added vs. Income Taxation.” Journal of Public Economics 66 (2): 173–197. https://doi.org/10.1016/S0047-2727(97)00044-3.

45.

Hatzipanayotou

Michael

M. S.

Miller

S. M.

. 1994. “Win-win Indirect tax Reform: A Modest Proposal.” Economics Letters 44: 147–151. https://doi.org/10.1016/0165-1765(93)00315-F.

46.

Henri

A. O.

2017. “Heavily Indebted Poor Countries Initiative (HIPC), Debt Relief, Economic Stability and Economic Growth in Africa.” Economic Change and Restructuring 52 (1): 89–121. https://doi.org/10.1007/s10644-017-9218-1.

47.

Hodrick

Prescott

. 1980. Postwar U.S. Business cycles: An Empirical Investigation, Document de Travail, N° 451, Carnagie-Mellon University.

48.

Holmes

M. J.

2010. “A Reassessment of the Twin Deficits Relationship.” Applied Economic Letters 17 (12): 1209–1212. https://doi.org/10.1080/00036840902845434.

49.

Kayizzi-Mugerwa

Anyanwu

J. C.

Conceiçao

. 2014. “Regional Integration in Africa: An introduction.” African Development Review 26 (S1): 1–6. https://doi.org/10.1111/1467-8268.12102.

50.

Keen

Ligthart

J. E.

. 2002. “Coordinating Tariff Reduction and Domestic tax Reform.” Journal of International Economics 56 (2): 489–507. https://doi.org/10.1016/S0022-1996(01)00123-4.

51.

Keen

Lockwood

. 2010. “The Value Added tax: Its Causes and Consequences.” Journal of Development Economics 92 (2): 138–151. https://doi.org/10.1016/j.jdeveco.2009.01.012.

52.

Keen

Simone

. 2004. Tax policies in developing countries: some lessons from 1990s and some challenge ahead, in Gupta et al. (dir.) Helping countries develop: the role of fiscal policy, Washington.

53.

Kim

C. H.

Kim

. 2006. “Does Korea Have Twin Deficits?” Applied Economic Letters 13 (10): 675–680. https://doi.org/10.1080/13504850500404910.

54.

Kobyagda

I. L.

2019. “Macroeconomic Determinants of the Mobilization of Tax Revenues of the Countries of the West African Economic and Monetary Union (WAEMU).” Modern Economy 10: 237–260. https://doi.org/10.4236/me.2019.101017.

55.

L’Angevin

Montagné

. 2006. Le policy mix en zone euro et aux Etats Unis de 1999 à aujourd’hui, Diagnostics Prévisions et Analyses Economique, No 113 juin 2006.

56.

Lis

E. M.

Nickel

. 2010. “The Impact of Extreme Weather Events on Budget Balances.” International Tax and Public Finance 17 (4): 378–399. https://doi.org/10.1007/s10797-010-9144-x.

57.

Liu

Moldogaziev

T. T.

Mikesell

J. L.

. 2017. “Corruption and State and Local Government Debt Expansion.” Public Administration Review 77 (5): 681–690. https://doi.org/10.1111/puar.12711.

58.

Maddala

G. S.

. 1999. “A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test.” Oxford Bulletin of Economics and Statistics 61 (S1): 631–652. https://doi.org/10.1111/1468-0084.0610s1631.

59.

Mansour

Rota-Graziosi

. 2012. “Coordination ﬁscale Dans L’Union Économique et Monétaire Ouest Africaine.” Revue D’économie du Développement 20 (3): 9–34. https://doi.org/10.3917/edd.263.0009.

60.

Marinheiro

C. F.

2008. “Ricardian Equivalence, Twin Deficits, and the Feldstein–Horioka Puzzle in Egypt.” Journal of Policy Modeling 30 (6): 1041–1056. https://doi.org/10.1016/j.jpolmod.2007.12.001.

61.

Medina

Schneider

. 2018. Shadow Economies Around the World: New Results for 158 Countries Over 1991–2015. Johannes Kepler University of Linz, Department of Economics, Linz. Working Paper. No. 1710.

62.

Meltzer

A. H.

Richard

S. F.

. 1981. “A Rational Theory of the Size of Government.” Journal of Political Economy 89 (5): 914–927. https://doi.org/10.1086/261013.

63.

Michael

M. S.

Hatzipanayotou

Miller

S. M.

. 1993. “Integrated Reforms of Tariffs and Consumption Taxes.” Journal of Public Economics 52 (3): 417–428. https://doi.org/10.1016/0047-2727(93)90044-T.

64.

Miller

S. M.

Russek

F. S.

. 1990. “Co-Integration and Error-Correction Models: The Temporal Causality Between Government Taxes and Spending.” Southern Economic Journal 57 (1): 221–229. https://doi.org/10.2307/1060491.

65.

Morrison

T. K.

1982. “Structural Determinants of Government Budget Deficits in Developing Countries.” World Development 10 (6): 467–473. https://doi.org/10.1016/0305-750X(82)90003-1.

66.

Mourre

Isbasoiu

G.-M.

Paternoster

Salto

. 2013. “The cyclicality-adjusted budget balance used in the EU fiscal framework: An update.” European Economy, Economic paper N°478.

67.

Munk

K. J.

2008. “Tax-Tariff Reform with Costs of tax Administration.” International Tax and Public Finance 15 (6): 647–667. https://doi.org/10.1007/s10797-007-9042-z.

68.

Oweye

1995. “The Casual Relationship Between Taxes and Expenditures in The G7 Countries: Cointegration and Error-Correction Models.” Applied Economics Letters 2: 19–22. https://doi.org/10.1080/135048595357744.

69.

Ramsey

F. P.

1927. “A Contribution to the Theory of Taxation.” The Economic Journal 37 (145): 47–61. https://doi.org/10.2307/2222721.

70.

Roubini

Sachs

J. D.

. 1989. “Political and Economic Determinants of Budget Deficits in the Industrial Democracies.” European Economic Review 33 (5): 903–933. https://doi.org/10.1016/0014-2921(89)90002-0.

71.

Savvides

1998. “Trade Policy and Income Inequality: New Evidence.” Economics Letters 61 (3): 365–372. https://doi.org/10.1016/S0165-1765(98)00197-9.

72.

Schneider

2010. “The Influence of Public Institutions on the Shadow Economy: An Empirical Investigation for OECD Countries.” European Journal of Law and Economics 6 (3): 441–468. https://doi.org/10.2202/1555-5879.1542.

73.

Shuaibu

2015. “Trade Liberalization and Intra-Regional Trade: A Case of Selected ECOWAS Countries.” African Development Review 27 (1): 27–40. https://doi.org/10.1111/1467-8268.12120.

74.

Sobrino

C. R.

2013. “The Twin Deficits Hypothesis and Reverse Causality: A Short-run Analysis of Peru.” Journal of Economics Finance and Administrative Science 18 (34): 9–15. https://doi.org/10.1016/S2077-1886(13)70018-0.

75.

Steiner

2017. Determinants of the Public Budget Balance: The Role of Official Capital Flows. No. D19-V1 in Beiträge zur Jahrestagung des Vereins für Socialpolitik.

76.

Stiglitz

J. E.

2010. “Development-Oriented tax Policy.” In Taxation in Developing Countries: Six Case Studies and Policy Implications, edited by Gordon

R. H.

, 11–36. New York, USA: Columbia University Press.

77.

Stiglitz

J. E.

Lafay

J.-D.

Rosengard

J. K.

. 2018. Economie du secteur public, Ouverture économique 4ième Edition américaine.

78.

Tauﬁk

2018. Modernization of the tax administration system : A theoretical review of improving tax capacity. In E3s web of conferences (Vol. 73, p. 10022).

79.

Trinnou

G. M.

2021. Analyse des facteurs explicatifs de l’effort fiscal et du potentiel fiscal dans les pays de l’UEMOA, Document d’Etude et de Recherche (DER) du COFEB, N°COFEB/DER/2021/03.

80.

Tujula

Wolswijk

. 2004. What determines fiscal balancesAn empirical investigation in determinants of changes in OECD budget balances, Working Paper Series, 422, European Central Bank.

81.

Turan

Mesut

Halit

. 2014. “Tax Smoothing Hypothesis: A Turkish Case.” Panoeconomicus 61 (4): 487–501. https://doi.org/10.2298/PAN1404487T.

82.

WAEMU [West African Economic and Monetary Union]. 2006. Décision No 10/206/CM/UEMOA portant adoption du programme de transition fiscale au sein de l’UEMOA.

83.

WAEMU [West African Economic and Monetary Union]. 2009a. Décision No 35/2009/CM/UEMOA portant création du dispositif institutionnel de suivi du programme de transition fiscale au sein de l’UEMOA.

84.

WAEMU [West African Economic and Monetary Union]. 2009b. Décision No 34/2009/CM/UEMOA portant adoption des critères et indicateurs de la transition fiscale au sein de l’UEMOA.

85.

Woo

2003. “Economic, Political, and Institutional Determinants of Public Deficits.” Journal of Public Economics 87 (3): 387–426. https://doi.org/10.1016/S0047-2727(01)00143-8.

Tax Transition in the Waemu Zone: Analysis of the Effects on Fiscal Deficit

Abstract

Keywords

Get full access to this article

References