In this paper, we estimate short- and long-term tax buoyancy for 44 sub-Saharan African (SSA) countries during 1980–2017 using time series and panel techniques. We find that the long-term tax buoyancy is either one or slightly above one for most SSA countries. Fragile states have a lower short-term tax buoyancy reflecting their institutional weaknesses. Short-term buoyancy of personal income tax is significantly less than one. Both short- and long-run tax responses are lower than those reported in previous cross-country studies, which can be interpreted as a reduced power of both automatic stabilization in the short run and fiscal sustainability in the long run. We find that central government debt and shadow economy exert a downward pressure on tax buoyancy. An important implication of these results is that the current tax systems in SSA would not be able to generate domestic revenues to the extent needed for financing the Sustainable Development Goals (SDGs).
- Error Correction Model
- Sub-Saharan Africa
- Sustainable Development Goals
- Tax buoyancy