Tax revenue mobilisation in Ethiopia

Mascagni, Giulia (2014) Tax revenue mobilisation in Ethiopia. Doctoral thesis (PhD), University of Sussex.

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Abstract

This thesis analyses tax revenue mobilisation in Ethiopia. The main research question
motivating the thesis regards the existence of a crowding out effect of foreign aid on
domestic public revenue. Throughout the research we are also able to identify other
constraints and opportunities for tax revenue mobilisation in Ethiopia, to shed light on
broader budget dynamics and to provide firm-level evidence on effective tax rates in the
Ethiopian manufacturing sector.

The thesis therefore contributes to the current debate on tax revenue mobilisation in
Africa by providing comprehensive evidence from Ethiopia, using longer time series than
most other studies in this literature. Moreover it provides a new theoretical framework to
analyse the aid-tax relation. In addition it contributes to the very small evidence base on
taxation at the firm level in Africa by virtually doubling the literature and by proposing
a theoretical framework for further research.

The thesis starts with a qualitative analysis of the Ethiopian fiscal history between
1960 and 2009. This chapter is based on a descriptive analysis of Ethiopian fiscal data,
on the study of secondary sources and on in-depth qualitative interviews.

On the basis of this deep understanding of the Ethiopian context, the thesis proceeds
by developing a theoretical framework to explain the possible substitution effect between
aid and tax. An empirical estimation of the model stemming from the theory shows that
aid is positively associated with tax revenues. Other determinants of the tax ratio to
GDP are found to be: trade openness, the manufacturing sector, the agricultural sector
and governance.

The following chapter takes a broader look at budget dynamics by using the cointegrated
VAR methodology. The results confirm the positive relation between aid and tax.
In addition we find evidence for the existence of a domestic budget equilibrium and for a
positive association between aid and capital expenditure in particular.

Finally the thesis takes a microeconomic look at taxation by analyzing effective tax
rates amongst Ethiopian firms. I find that while tax incentives are widely used in Ethiopia,
they do not seem to be affected by lobbying or political connections of the firm.

Item Type: Thesis (Doctoral)
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HJ Public Finance > HJ2240 Revenue. Taxation. Internal revenue
Depositing User: Library Cataloguing
Date Deposited: 17 Dec 2014 12:18
Last Modified: 28 Sep 2015 12:55
URI: http://sro.sussex.ac.uk/id/eprint/51654

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