New Evidence on Tax-Aid Nexus
(2021) EKHS22 20211Department of Economic History
- Abstract
- Effective tax systems play a key role in self-sustained economic growth. Where foreign aid can provide much needed funds for less developed countries, it may also increase aid dependency if the country does not simultaneously improve its taxing capacity. This thesis is empirically investigating the relationship of foreign aid and tax revenue mobilization in a panel of 53 African countries during 1980-2018. The instrumental variable approach yields a positive short run effect for total ODA and taxes. This gives a positive outlook of taxing and development and reduces stress over fiduciary risks, moral hazard and aid dependency often attributed to foreign aid. Additionally, the thesis finds a negative association with taxes and technical... (More)
- Effective tax systems play a key role in self-sustained economic growth. Where foreign aid can provide much needed funds for less developed countries, it may also increase aid dependency if the country does not simultaneously improve its taxing capacity. This thesis is empirically investigating the relationship of foreign aid and tax revenue mobilization in a panel of 53 African countries during 1980-2018. The instrumental variable approach yields a positive short run effect for total ODA and taxes. This gives a positive outlook of taxing and development and reduces stress over fiduciary risks, moral hazard and aid dependency often attributed to foreign aid. Additionally, the thesis finds a negative association with taxes and technical assistance, i.e., professional services often included in aid that aim to improve the fiscal management of the aid funds. Consequently, aid donors should develop better ways to offer technical assistance that is better aligned with the objectives of the recipient governments. Concessional loans, often cited as a preferred aid modality due to lower fiduciary risks, do not show any statistically significant association with taxes. (Less)
- Popular Abstract
- Effective tax systems play a key role in self-sustained economic growth. Where foreign aid can provide much needed funds for less developed countries, it may also increase aid dependency if the country does not simultaneously improve its taxing capacity. This thesis is empirically investigating the relationship of foreign aid and tax revenue mobilization in a panel of 53 African countries during 1980-2018. The instrumental variable approach yields a positive short run effect for total ODA and taxes. This gives a positive outlook of taxing and development and reduces stress over fiduciary risks, moral hazard and aid dependency often attributed to foreign aid. Additionally, the thesis finds a negative association with taxes and technical... (More)
- Effective tax systems play a key role in self-sustained economic growth. Where foreign aid can provide much needed funds for less developed countries, it may also increase aid dependency if the country does not simultaneously improve its taxing capacity. This thesis is empirically investigating the relationship of foreign aid and tax revenue mobilization in a panel of 53 African countries during 1980-2018. The instrumental variable approach yields a positive short run effect for total ODA and taxes. This gives a positive outlook of taxing and development and reduces stress over fiduciary risks, moral hazard and aid dependency often attributed to foreign aid. Additionally, the thesis finds a negative association with taxes and technical assistance, i.e., professional services often included in aid that aim to improve the fiscal management of the aid funds. Consequently, aid donors should develop better ways to offer technical assistance that is better aligned with the objectives of the recipient governments. Concessional loans, often cited as a preferred aid modality due to lower fiduciary risks, do not show any statistically significant association with taxes. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9054155
- author
- Uitto, Heidi LU
- supervisor
- organization
- alternative title
- Empirical Investigation on Impact of Foreign Aid on Tax Revenue Mobilization in Africa
- course
- EKHS22 20211
- year
- 2021
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Africa, Tax revenue mobilization, foreign aid, aid fungibility, ODA, fiscal response to aid
- language
- English
- id
- 9054155
- date added to LUP
- 2021-06-24 13:15:13
- date last changed
- 2021-06-24 13:15:13
@misc{9054155,
abstract = {{Effective tax systems play a key role in self-sustained economic growth. Where foreign aid can provide much needed funds for less developed countries, it may also increase aid dependency if the country does not simultaneously improve its taxing capacity. This thesis is empirically investigating the relationship of foreign aid and tax revenue mobilization in a panel of 53 African countries during 1980-2018. The instrumental variable approach yields a positive short run effect for total ODA and taxes. This gives a positive outlook of taxing and development and reduces stress over fiduciary risks, moral hazard and aid dependency often attributed to foreign aid. Additionally, the thesis finds a negative association with taxes and technical assistance, i.e., professional services often included in aid that aim to improve the fiscal management of the aid funds. Consequently, aid donors should develop better ways to offer technical assistance that is better aligned with the objectives of the recipient governments. Concessional loans, often cited as a preferred aid modality due to lower fiduciary risks, do not show any statistically significant association with taxes.}},
author = {{Uitto, Heidi}},
language = {{eng}},
note = {{Student Paper}},
title = {{New Evidence on Tax-Aid Nexus}},
year = {{2021}},
}