Tax Reforms, Civil Conflicts and Tax Revenue Performance in Burundi
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Date
2021-09-23
Authors
Ndoricimpa, Arcade
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research Consortium
Abstract
The aim of this study is to examine the effects of tax reforms and civil conflicts on tax
performance in Burundi. The results from a regression analysis on a tax performance
equation indicate that civil conflicts did not significantly affect total tax revenue,
international trade taxes or income tax. One possible explanation for that finding
is that, apart from the chaotic period 1993–1995, for the rest of the civil war period,
conflicts affected mostly rural areas and had far less of an effect on the capital city
Bujumbura, home to most industries and services. Consequently, after 1995, the civil
war affected the agricultural sector to a much greater extent than the industrial and
services sectors, which have the most taxpayers. However, civil conflicts have had
significant negative effects on goods and services taxes. This is due to the negative
effect of conflict on economic activity. The results of the effect on tax reforms suggest
that tax reforms do not have a significant effect on total tax revenue or the tax
categories. The reasons why tax reforms may not have had an effect on tax revenue
performance include the prevalence of fiscal corruption, the negative effect of conflicts
on the economy, abusive tax exemptions, and failure to focus on widening the tax
base. Further results from the estimation of tax buoyancy and elasticity indicate that
international trade tax is the strong point of the tax system in the short run, while tax
on goods and services is the strong point in the long run. In addition, a high tax effort
is estimated, which can be explained by the narrowness of the tax base comprised
mainly of a few big taxpayers, coupled with a very large informal sector. However,
it should be noted that while the tax system in Burundi is characterized by over exploited taxable capacities, it still relies on foreign aid and grants to finance much
of its expenditure requirements. There is a need to rethink the implementation of tax
reforms in Burundi to enhance their effectiveness.
Description
Keywords
tax reforms, , civil conflicts, , tax revenue performance, , Burundi