Tax Revenues in Fragile and Conflict-Affected States—Why Are They Low and How Can We Raise Them?

IMF Working Papers, July 24, 2020

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Canonical URL: Tax Revenues in Fragile and Conflict-Affected States—Why Are They Low and How Can We Raise Them?

Paper type: IMF Working Paper No. 2020/143
Authors: Bernardin Akitoby, Jiro Honda, Keyra Primus
Publication date: July 24, 2020
Pages: 43
DOI: https://doi.org/10.5089/9781513550848.001
ISBN: 9781513550848
ISSN: 1018-5941
Core subject areas: Customs administration core functions; Excises; Revenue administration; Tax administration core functions; Tax collection; Taxes
Keywords highlighted by the authors: administration reform, Conflict-Affected States, country authorities, Customs administration core functions, customs administration reform, customs duty, effectiveness index, Excises, Fragile, Global, governance issue, governance variable, government effectiveness, income tax, Middle East, modernization program, reform effort, revenue administration reform, Sub-Saharan Africa, Tax administration core functions, tax administration modernization program, tax administration reform, Tax collection, tax reform, tax reform strategy, Tax Revenue Mobilization, WP

Raising revenues is a formidable challenge for fragile and conflict-affected states (FCS), as reconfirmed during the COVID-19 crisis.
Many FCS achieved some recovery of tax revenues, but they found it challenging to sustain momentum beyond three years.
Changes in the quality of institutions (for example, government effectiveness and control of corruption) are a key contributory factor to tax performance in FCS, and this institutional effect is much more pronounced for FCS than for non-FCS.

The paper examines tax increase episodes for four countries: Liberia, Malawi, Nepal, and the Solomon Islands.
Two cross-cutting lessons from these FCS experiences:
- Tax reforms can be pursued even with initially weak institutions.
- Strong political commitment is important to sustain reform efforts and realize long-lasting, sizable gains.

Prioritize improvements in institutional quality (government effectiveness, control of corruption) as central to improving tax performance in FCS.
Support and design tax reforms that are feasible under weak initial institutional conditions, coupled with measures to build institutional capacity.
Secure and sustain strong political commitment to carry reform efforts beyond short-term revenue recoveries (beyond three years) to achieve lasting, sizable gains.

Series: Working Paper No. 2020/143
Volume: 2020
Stock No: WPIEA2020143
The paper is part of IMF Working Papers, which describe research in progress and are published to elicit comments and encourage debate.

Source: IMF Working Paper "Tax Revenues in Fragile and Conflict-Affected States—Why Are They Low and How Can We Raise Them?", July 24, 2020.