Fiscal Resilience Building: Insights from a New Tax Revenue Diversification Index - Université Clermont Auvergne Access content directly
Preprints, Working Papers, ... Year : 2020

Fiscal Resilience Building: Insights from a New Tax Revenue Diversification Index

Rasmané Ouedraogo
  • Function : Author
René Tapsoba
  • Function : Author
  • PersonId : 766930
  • IdRef : 182324168
Mousse Ndoye Sow
  • Function : Author

Abstract

Does the reliance on diversified tax structure enhance resilience to fiscal risks? This paper gives an answer to this question by proposing a new cross-country tax revenue diversification index (RDI). The RDI builds on the Theil index, and unlike the few existing tax diversification indices, which are constructed only at the state level for the US, is computed at the national level, covering a broad panel of 127 countries over the period 2000-15. We find suggestive evidence that tax revenue diversification reduces tax revenue volatility, thus bringing to the data long-held views about the prominence of tax revenue diversification for fiscal resilience strengthening. While exploring the drivers of the RDI, we find that tax revenue diversification is not just a reflection of economic diversification, but also an outcome of macroeconomic, political and institutional factors. Interestingly, a non-monotone relationship is also at play between the RDI and economic development, with countries’ portfolio of tax sources getting more diversified as their economy develops, until a tipping point, where richer countries start finding it harder to diversify further their tax revenue sources.
No file

Dates and versions

hal-03182358 , version 1 (26-03-2021)

Identifiers

  • HAL Id : hal-03182358 , version 1

Cite

Rasmané Ouedraogo, René Tapsoba, Mousse Ndoye Sow, Ali Compaoré. Fiscal Resilience Building: Insights from a New Tax Revenue Diversification Index. 2020. ⟨hal-03182358⟩
34 View
0 Download

Share

Gmail Mastodon Facebook X LinkedIn More