Electricity Provision and Tax Mobilization in Africa

42 Pages Posted: 17 Apr 2018

See all articles by Moussa Blimpo

Moussa Blimpo

World Bank

Justice Tei Mensah

Swedish University of Agricultural Sciences (SLU)

Ken Opalo

Georgetown University

Ruifan Shi

Georgetown University

Date Written: April 16, 2018

Abstract

This paper provides evidence on how the provision of social infrastructure, such as reliable electricity, can be leveraged to increase taxation in developing countries, particularly in Sub-Saharan Africa. First, using comprehensive data from the latest round of the Afrobarometer survey, the paper uses the instrumental variable approach to estimate the effect of access to and reliability of electricity on the tax compliance attitudes of citizens in 36 countries in Sub-Saharan Africa. The evidence shows a significant positive effect of electrification on tax compliance attitudes, with potentially strong externalities. The analysis also finds that the reliability of supply is crucial in explaining the impact of electricity access on attitudes toward taxes. Second, the paper provides suggestive evidence on national identity as one channel driving this impact. Access to social amenities such as electricity induces a sense of national identity among citizens, thereby incentivizing them to contribute, through taxes, toward the functioning of the state. Third, using data from the most recent World Bank Enterprise Surveys and under conservative assumptions, the paper estimates that countries in the region could in total generate additional tax revenues of more than $9.5 billion (4.3 percent of total tax revenue) per year solely by resolving issues related to electricity shortages. Put together, the paper concludes that the financial returns associated with public investments toward improving access to and reliability of electricity are substantial and could be harnessed to augment the financing gap in the sector.

Keywords: Energy Policies & Economics, Electric Power, Tax Law, Public Finance Decentralization and Poverty Reduction, Public Sector Economics, Tax Administration, Economic Adjustment and Lending, Taxation & Subsidies, Macro-Fiscal Policy, Employment and Unemployment

Suggested Citation

Blimpo, Moussa and Mensah, Justice Tei and Opalo, Ken Ochieng' and Shi, Ruifan, Electricity Provision and Tax Mobilization in Africa (April 16, 2018). World Bank Policy Research Working Paper No. 8408. Available at SSRN: https://ssrn.com/abstract=3163962

Moussa Blimpo (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

HOME PAGE: http://https://sites.google.com/site/mpblimpo/home

Justice Tei Mensah

Swedish University of Agricultural Sciences (SLU)

S-901 83 Umea
Sweden

Ken Ochieng' Opalo

Georgetown University ( email )

Washington, DC 20057
United States

Ruifan Shi

Georgetown University

Washington, DC 20057
United States

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