Resource Dependence and Fiscal Effort in Sub-Saharan Africa

High natural resource prices in recent years have resulted in sizeable increases in fiscal revenuefor many resource-exporting countries in sub-Saharan Africa. However, this revenue source isvolatile, and arguably these countries should also rely on other forms of taxation to help fundpublic expenditure. This paper asks whether the availability of higher resource revenue in thesecountries has led to lower taxation effort of other revenue categories. The question is analyzedboth in terms of the relationship between non-resource tax revenue and resource revenue, andbetween non-resource tax revenue and statutory tax rates. The paper finds evidence suggestingthat nonresource revenue is negatively influenced by a higher resource revenue-to-GDP ratio.The lower take up of nonresource taxes in resource-rich countries is correlated with higher levelsof corruption in these countries, suggesting weaker institutions affect nonresource revenuethrough incentives for tax evasion and/or large tax exemptions as argued in the literature.