Non-resource Revenue Research Articles

The Impact of Resource Revenue on Non-Resource Tax Revenue in Oil-Exporting Countries: Evidence from Nonlinear Analysis

The main objective of this study was to examine the asymmetric effect of resource tax revenues on non-resource ones in oil-rich countries, as most previous research on the subject has assumed a symmetric resource-non-resource tax revenue nexus. We employed linear ARDL model to analyze the short- and long-term effects and found a negative relationship between resource and non-resource tax revenues. Based on nonlinear ARDL model estimates, empirical results provide strong evidence for the asymmetric effect of resource tax revenues. In the long-run, positive shocks have negative impacts on non-resource tax revenues. Conversely, negative shocks were found to not lead to increased non-resource tax revenues. In addition, findings show that the short-term effects are stronger when resource tax revenues increase.

Government responses to oilfield discoveries: Impact of resource wealth on non-resource tax revenues

It has often been argued that countries that produce natural resources mobilize less non-resource tax revenues than other countries. In this paper, we exploit the exogenous variation in the timing of giant oilfield discoveries to estimate the causal impact of natural resources on taxation. The timing of giant oilfield discoveries is arguably exogenous and thus renders them appealing to empirically examine this argument. This allows us to examine the performance of non-resource tax revenue effort before and immediately after discovery as well as the period corresponding to the inflow of revenues from the production. We find that non-resource tax revenues tend to increase in the period following the discovery before the onset of production and after production commences. This effect is due to an increase in non-resource indirect tax revenues. Further analysis shows that both the total and indirect non-resource tax revenues, experience an increase in only low- -middle income countries, and largely driven by an increase in the consumption of goods and services.

Financial Inclusion and Information Communication Technology on Tax Performance in Sub-Saharan Africa

Purpose: The main objective of this paper is to determine empirically the impact of financial inclusion and Information Communication Technology (ICT) on tax performance in Sub-Saharan African countries; determine the extent to which the elements of financial inclusion have influenced tax performance of countries in Sub-Saharan Africa; and examine the role technology plays in impacting the performance of taxes in Sub-Saharan African countries. Theoretical Framework: The existing theories that serve as a roadmap for the development of this study are Theory of Digital Diffusion and Theory of Margins. Digital transformation has an important impact on the operations and systems of every economy, which often triggers a positive effect on taxes. Diffusion innovation theory was initiated by Rogers in 1962. The Theory of Margin on the other hand, is a theoretical school that gives validity to the impact of financial development on product output. It suggests that more access to financial services and products is vital for high output and economic advancement. Design/Methodology/Approach: The population considered in this study was 48 sub-Saharan African Countries from the period of 1999 to 2019. The methods used for the analysis consists of the descriptive and correlation analysis on the identified variables and a creation of financial inclusion index using the Principal Component Analysis to deal with multiclonality challenge amongst the financial inclusion proxies, it also adopted the two-staged least square estimation technique for the empirical analysis. Findings: The study reveals inter alia that the variables for financial inclusion and ICT proxies are overwhelmingly positive and significantly impact on the tax performance (i.e., total tax revenue and the non-resource tax revenue as percentages of GDP), in sub-Saharan Africa and that the financial inclusion index has positive effect on tax performance in sub-Saharan Africa. We also observed that there is a positive relationship between technology and tax performance in sub-Saharan Africa. Research Practical & Social implications: Policies should be formulated to engender enhancement of technology and more investment should be allocated to technology as it is discovered to drive financial inclusion and promotes tax revenue mobilization. In general, the findings indicate that policies are needed to engender an enhancement of technology and more investment should be channeled to technology as it affects financial inclusion and by logical extension, the promotion of tax revenue mobilization. Originality/value: The challenge of tax implementation can be directly ascribed to an ineffective tax system. A tax management that is of high in superiority, helps to make the tax mobilization process more transparent and efficient, and also reduce the level of shadow economy, which main feature is non- remittance or payment of tax. This study reveals that a tax administration system can only operate effectively with the use of modern information technologies.

Несырьевые поступления в консолидированный бюджет: анализ по видам экономической деятельности

This paper presents an analysis of non-resource revenues of the consolidated budget of Russia by types of economic activity. The purpose of this study was to identify which sectors are the most sensitive to shocks form the fiscal point of view, and to answer the questions: how long it takes for the revenues of different sectors recover from “local lows” and how the sectoral structure of budget revenues affects the volatility of payments. In accordance with the set objectives, we examined the dynamics of consolidated budget revenues in real terms for the period 2008–2022 as a whole and by sector. In addition, a sectoral analysis was provided for CIT. The calculations were based on the data of the Federal Tax Service prepared by excluding payments on natural rent. The analysis showed that revenue fluctuations are largely determined by the dynamics of payments from the extractive sector (especially oil production), and an increase in the sector’s share is likely to increase the overall volatility of revenues. In fiscal terms, the processing sector is the most sustainable for total revenues but provides a source of volatility in CIT dynamics. Revenues from financial activities show the fastest recovery from the crises. Trade and finance have a stabilizing effect on both total revenues and CIT dynamics. The results of the study can be used at the stage of budget planning.

Tax Transition Reform and Economic Growth in Developing Countries

ABSTRACT The current article examines the economic growth effect of tax transition reform in developing countries. Tax transition reform is defined here as the process that entails the convergence of developing countries’ tax structure toward that of developed countries. The analysis covers a sample of 101 developing countries over the period of 1980 to 2019. The empirical analysis that makes use of the two-step system generalized method of moments has shown that tax transition reform promotes economic growth, including in countries with a high share of non-resource tax revenue in total public revenue. These findings have important policy implications.

Non-resource revenues and the resource curse in different institutional structures: The DIGNAR-MTFF model

Numerous studies have examined the resource curse using different perspectives. This study investigates how the resource curse occurs in three countries with different institutional structures using a new model. The DIGNAR-MTFF model introduced and presented in this article is a combination of the DIGNAR model and the FMM-MTFF model. This model includes a consistent framework for industrial production, the inflow of intermediate goods, public investment inefficiencies, learning-by-doing externalities in foreign and intermediate goods sectors, and absorptive capacity constraints. In this research, the Input-Output Table data for Saudi Arabia, Mexico, and Norway in 2015 have been used. A simplified three-sector version of the Input-Output table compares the model's output for countries. The model is used under a specific scenario with different oil revenue cycles. The results for Saudi Arabia, a country with a specific institutional structure characterized by high dependence on oil revenues, show that the effects of abundant resources on non-resource incomes are severely negative indicating that Saudi Arabia experienced the Dutch disease with more intensity. The Dutch disease was less severe in Norway and Mexico, which have broader tax systems based on different institutional structures. The model's results show the role of an efficient tax system in overcoming natural resources' revenue cycles and the independence of the economies from these revenue cycles thus avoiding the resource curse.

Effect of Tax Structure Reform on Public Debt in Developing Countries

Abstract To reduce their public revenue dependence on international trade tax revenue, policymakers in developing countries have engaged (with the assistance of international financial institutions and bilateral donors) in the reform of their tax revenue structure, with a view to reducing their public revenue dependence on international trade tax revenue. This reform (referred to as tax reform) is particularly important given the ongoing unavoidable trade liberalization that sooner or later further erode international trade revenue. Using an unbalanced panel dataset of 127 countries over the period 1980–2019, and the two-step system generalized method of moments, the present article investigates the public debt effect of this tax reform. The empirical analysis has shown that a greater extent of tax reform helps to reduce public debt, with the magnitude of this negative effect being larger in countries with a high share of non-resource tax revenue in public revenue. In addition, the public debt reduction effect of tax reform is larger, the greater is countries’ share of international trade tax revenue in non-resource tax revenue. This analysis has important policy implications. (JEL codes: H63, H10, and H20)

Natural Resource Dependence, Corruption, and Tax Revenue Mobilization

This paper explores the dynamic interactions between natural resource dependence, corruption, and tax revenue mobilization worldwide. The empirical analysis used a cross-section augmented autoregressive distributed lag (CS-ARDL) approach that accounts for time dynamics, cross-sectional heterogeneity, and cross-sectional dependence. The results show that the interaction between natural resource dependence, corruption, and tax revenue mobilization is complex and depends on the type of tax revenue. For example, reducing corruption stimulates non-resource tax revenue mobilization compared to total tax revenue; however, tax revenue mobilization is sometimes a source of corruption and evasion of natural resource rents. The results suggest that tax administration institutions need to be strengthened to limit predatory and rent-seeking behavior.

The subnational crowding out effect of mining windfalls on local tax effort: Does the level of local provision of public goods matter?

Although the resource curse offers evidence for the national crowding out generated by resource windfalls from mining, subnational crowding is not fully understood. This knowledge gap is problematic because these windfalls should cover the negative externalities that exist in host zones. Additionally, these communities have different fiscal responsibilities due to the mining industry's environmental, economic, and social costs. This article estimates the subnational crowd out of mining windfalls on local tax collection by considering different levels of fiscal responsibility. We employ panel data for 322 Chilean municipalities between 2008 and 2019 using an exogenous rule for assigning mining windfalls in order to attribute causality. Our results confirm the crowding out hypothesis. First, a US$1.0 increase in mining windfalls results in a US$0.2 decrease in the property tax collected. Second, subnational crowding out is twice as high in municipalities with a high level of fiscal responsibility; a US$1.0 increase in windfalls crowds out US$0.4 in non-resource revenue. Third, considering the influence of nearby neighborhoods and the spatial interdependence, crowding out is four times higher than non-spatial estimations. These results call for local policies that consider the fiscal capacity of a municipality in order to disincentivize undesirable behavior from extra resource revenues.

The relationship between trade openness and government resource revenue in resource-dependent countries

Natural resource-abundant countries are generally dependent on resource revenue for their government budgets. Given the volatile prices of natural resources, such high dependence has led to the need for government revenue diversification, that is, shifting from resource sources to non-resource sources. Meanwhile, recent globalization helps promote economic growth, but it makes resource-dependent countries more vulnerable to fluctuations in resource prices, motivating them to diversify revenue sources for sound fiscal policies. Thus, examining the role of international trade in government revenue diversification is an important issue for resource-dependent countries, which has not been examined empirically in the literature. To fill the research gap, this study discusses this issue in resource-abundant countries. An autoregressive distributed lag model is used with panel data of 13 countries from 1996 to 2014. Estimations reveal a negative long-run association between government resource revenue and trade openness. Resource-abundant countries that promote trade liberalization tend to break down the resource-dependent structure of government revenues. Our analysis also shows a negative long-run association between government resource and non-resource revenues, which suggests the substitutability between the two government revenue sources. The promotion of government non-resource revenues would help governments receive the benefits of stable government revenues.

Tax revenue instability and tax revenue in developed and developing countries

Purpose This paper aims to explore the effect of non-resource tax revenue instability on non-resource tax revenue in developed and developing countries. Design/methodology/approach The analysis has used an unbalanced panel data set of 146 countries over the period 1981–2016, as well as the two-step system generalized methods of moment approach. Findings The empirical analysis has suggested that non-resource tax revenue instability influences negatively non-resource tax revenue share of gross domestic product. The magnitude of this negative effect is higher in less developed countries than in relatively advanced countries. This negative effect materializes through public expenditure instability: non-resource tax revenue instability exerts a higher effect on non-resource tax revenue share as the degree of public expenditure instability increases. Finally, non-resource tax revenue instability exerts a higher negative effect on non-resource tax revenue share as economic growth volatility rises, inflation volatility increases and terms of trade instability increases. Research limitations/implications The main policy implication of this analysis is that policies that help ensure the stability of non-resource tax revenue also contribute to improving countries’ non-resource tax revenue share. For example, governments’ measures that help cope with or prevent the severe adverse effects of shocks on economies (shocks that could translate into higher tax revenue instability) would ultimately help enhance countries’ tax revenue performance. Practical implications The severity of the current COVID-19 pandemic shock (which is a supply and demand shock) and the macroeconomic uncertainty that it has generated – inter alia, in terms of economic growth instability, terms of trade instability, inflation volatility and public expenditure instability – are likely to result in severe tax revenue losses. Governments in both developed and developing countries would surely learn from the management of this crisis so as to prepare for possible future economic, financial and health crises with a view to dampening their adverse macroeconomic effects, including here their negative tax revenue effects. Originality/value To the best of the author’s knowledge, this topic is being addressed in the empirical literature for the first time.

Export product diversification, poverty and tax revenue in developing countries

The current paper has examined the effect of both export product diversification and poverty on non-resource tax revenue in developing countries. The analysis has used an unbalanced panel dataset of 111 countries over the period 1980–2014. Based on the Blundell and Bond two-step system Generalized Methods of Moments technique, the empirical analysis has shown interesting findings. Export product concentration and poverty influence negatively non-resource tax revenue over the full sample, but this effect varies across countries in the sample. Furthermore, the effect of export product diversification on non-resource tax revenue performance depends on the level of poverty. It appears that export product diversification influences positively non-resource tax revenue performance in countries that experience lower poverty rates. From a policy perspective, these findings show that policies in favour of diversifying export product baskets and reducing poverty would contribute to enhancing non-resource tax revenue performance in developing countries.

Promoting female economic inclusion for tax performance in Sub-Saharan Africa

This study explores whether female economic inclusion enhances tax performance in a sample of 48 countries in Sub-Saharan Africa from 2000 to 2018. The study’s empirical evidence is based on the generalized method of moments in order to account for endogeneity concerns. Three tax performance measurements are used, notably, total taxes revenue excluding social contributions, reported tax revenue derived from natural resources sources, and total non-resource tax revenue. Three female inclusion indicators are used, namely, female employment in industry, female labour force participation, and female employment. The following empirical evidences are documented; (i) There is a negative net effect from the enhancement of female employment in the industry on the total tax revenue. (ii) There is a positive net effect of female employment in the industry on the non-resource taxes. An extended threshold analysis is performed to establish the critical masses that could further influence tax performance positively. The following thresholds are established. (i) a minimum of 15.35 “employment in industry, female (% of female employment)” for the total tax revenue and (ii) a maximum of 23.75 “employment in industry, female (% of female employment)” for the non-resource tax revenue. These critical masses are crucial for sustainable development because, below or beyond these thresholds, policymakers should complement the female economic inclusion with other economic measures designed to improve tax performance in Sub-Saharan Africa.

Impact of the volatility of resource revenue on non-resource revenue volatility

PurposeThis paper investigates the effect of the volatility of resource revenue on the volatility of non-resource revenue.Design/methodology/approachThe empirical analysis has utilized an unbalanced panel data set comprising 54 countries over the period 1980–2015. The two-step system generalized methods of moments (GMM) is the main economic approach used to carry out the empirical analysis.FindingsResults show that resource revenue volatility generates lower non-resource revenue volatility only when the share of resource revenue in total public revenue is lower than 18%. Otherwise, higher resource revenue volatility would result in a rise in non-resource revenue volatility.Research limitations/implicationsIn light of the adverse effect of volatility of non-resource revenue on public spending, and hence on economic growth and development prospects, countries whose total public revenue is highly dependent on resource revenue should adopt appropriate policies to ensure the rise in non-resource revenue, as well as the stability of the latter.Practical implicationsEconomic diversification in resource-rich countries (particularly in developing countries among them) could contribute to reducing the dependence of economies on natural resources, and hence the dependence of public revenue on resource revenue. Therefore, policies in favour of economic diversification would contribute to stabilizing non-resource revenue, which is essential for financing development needs.Originality/valueTo the best of our knowledge, this topic has not been addressed in the literature.

More oil, more or less taxes? New evidence on the impact of resource revenue on domestic tax revenue

The fiscal management of natural resource revenue is challenging particularly for developing countries. Despite providing a sizable amount of fiscal revenue, the volatility of natural resource revenue requires countries to rely on non-resource domestic revenue sources. In this paper, I revisit the question of how revenue from natural resources affects non-resource tax revenue and its components. I test the hypothesis that increased resource revenue is offset by a decrease in domestic non-resource tax revenue by exploiting an exogenous variation arising from giant oil and gas discoveries. I do not find evidence supporting the hypothesis of substitution between resource and non-resource revenues. Rather, I find that giant oil discoveries lead to temporarily higher tax collection that peaks when production starts. Interestingly, the increase in tax revenue occurs only in developing countries and is attributed to increased effort on taxes on income and international trade.

Macroeconomic impacts of non-resource revenue mobilization in CEMAC

ABSTRACT This letter investigates main macroeconomic impacts of enhanced non-resource revenue mobilization in Africa’s CEMAC region. Model simulations indicate that non-oil revenue mobilization reduces debt and increases non-resource output in the long term. The mobilization, however, triggers an output decline in the short run and carries undesirable distributional effects. Cash transfers targeting the most vulnerable perform better than untargeted public investments to mitigate such increased inequality.

Can foreign aid enhance domestic resource mobilisation in Nigeria?

ABSTRACT The role of foreign aid in enhancing economic growth in aid-recipient countries remains much debated. This paper takes an empirical perspective and focusing on non-resource tax revenues in Nigeria, examines whether foreign aid does enhance public domestic resource mobilisation (DRM), with a specific focus on tax revenue mobilisation. Using grants and loans, for the 1981–2015 period, the results indicate that foreign aid in the form of grants can be an effective tool for enhancing tax revenue mobilisation in the long-run. The results suggest that by including measures to ensure adherence to prescripts of greater accountability, foreign aid in the form of grants helps enhance tax revenue compared to loans whose repayments has the potential for policies that may have a negative impact on tax revenues.

Impact of international tourism receipts on public revenue in developed and developing countries

Purpose This paper aims to investigate empirically how international tourism receipts influence public revenue, in particular non-resource revenue. Design/methodology/approach The analysis relies on an unbalanced panel of 156 countries (including both developed and developing countries) over the period 1995-2015. The empirical analysis uses the two-step system generalized methods of moments estimator. Findings The empirical results show that international tourism receipts exert a positive and significant impact on non-resource tax revenue. In addition, this effect increases as countries' development levels rise, which signifies that in terms of non-resource tax revenue, an increase in international tourism receipts benefit much more to advanced economies than to less advanced economies. Research limitations/implications These findings call for governments notably in developing countries to develop the tourism sector and concurrently to strengthen tax administrations (and possibly design appropriate tax policy for the tourism sector) to derive the full advantage in terms of public revenue from the rise in international tourism receipts. Practical implications The analysis highlights the importance of international tourism receipts for public revenue. This would help scholars and policymakers have a clearer view, at least in terms of magnitude, on the impact of international tourism receipts on non-resource tax revenue. Originality/value To the best of the author’s knowledge, this is first the study that investigates this topic.

Promoting Female Economic Inclusion for Tax Performance in Sub-Saharan Africa

This study explores whether female economic inclusion enhances tax performance in a sample of 48 countries in Sub-Saharan Africa from 2000 to 2018. The study’s empirical evidence is based on the generalized method of moments in order to account for endogeneity concerns. Three tax performance measurements are used, notably, total taxes revenue excluding social contributions, reported tax revenue derived from natural resources sources, and total non-resource tax revenue. Three female inclusion indicators are used, namely, female employment in industry, female labour force participation, and female employment. The following empirical evidences are documented; (i) There is a negative net effect from the enhancement of female employment in the industry on the total tax revenue. (ii) There is a positive net effect of female employment in the industry on the non-resource taxes. An extended threshold analysis is performed to establish the critical masses that could further influence tax performance positively. The following thresholds are established. (i) a minimum of 15.35 “employment in industry, female (% of female employment)” for the total tax revenue and (ii) a maximum of 23.75 “employment in industry, female (% of female employment)” for the non-resource tax revenue. These critical masses are crucial for sustainable development because, below or beyond these thresholds, policy makers should complement the female economic inclusion with other economic measures designed to improve tax performance in Sub-Saharan Africa.

A comparative analysis of taxation and revenue trends in the Middle East and North Africa (MENA) region

Purpose The purpose of this paper is to gain insight into how well past reforms have performed against revenue, equity and efficiency benchmarks of tax policymaking, so that the direction of future reform of tax system might be determined. It also presents a comparative analysis of taxation and revenue trends in the Middle East and North Africa (MENA) region over the data set period 1990-2012. Design/methodology/approach By overviewing the development and relative significance of resource revenues, allocating non-resource taxes and examining the tax policies of constituent countries, this paper presents a comparative review of taxation and revenue trends in the MENA region. Findings Findings showed, on average, a slight decline in non-resource revenues against the significant rise in income from resources. The analysis of government revenues and current taxation structures provide insight into how prior reforms have performed against the standard measures of tax policy-making (i.e. revenue, equity and efficiency) and directions for change leading to the establishment of simple tax systems. The study observes regional differences, such as the higher tax and revenues of the Maghreb sub-region over the Mashreq, except for value-added tax, where low rates were associated with equal or greater revenue. Similarities were also found, including the partial compensation by income taxes (not indirect taxes) for revenue lost through trade liberalization. The challenges of tax reform are found to vary across countries and opportunities for improving equity and reducing the complexity of tax systems across the region are identified. Research limitations/implications Reforms in all tax systems could have major implications for the country, employment, earnings and tax revenues; but recommendations would require political value judgments and government decisions. The study suggests eliminating the current tax system, thereby replacing one of the more distortionary taxes in the current system with a neutral and efficient tax. Originality/value The paper signals the need, even of the oil-rich states of the Gulf Cooperation Council, for governments to build tax systems capable of capturing and spending revenues effectively into the future.