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<p>This study examines the impact of structural transformation on VAT productivity, focusing on both VAT C-efficiency and traditional VAT efficiency across 15 African countries from 2000 to 2023. Using panel-corrected standard errors and two-stage least squares (2SLS) estimations, the analysis reveals that transitioning towards a service-based economy significantly improves VAT efficiency. Specifically, increases in the service sector’s share of employment and value added positively affect VAT efficiency, suggesting that economies shifting from agriculture to services experience more effective VAT collection. Conversely, higher standard VAT rates consistently reduce VAT C-efficiency across various models. Additionally, the study finds that government effectiveness and higher real GDP per capita are positively associated with VAT efficiency. However, rapid urbanization, trade openness, and agricultural value added have a detrimental impact on VAT efficiency, highlighting areas where VAT systems may encounter challenges.</p>

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Does structural transformation enhance tax efficiency in Sub-Saharan africa?

  • 期刊论文

  • 发表日期：

    2025年12月22日

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  • Fentaw Leykun Fisseha,
  • Getaneh Mihret Ayele

摘要

This study examines the impact of structural transformation on VAT productivity, focusing on both VAT C-efficiency and traditional VAT efficiency across 15 African countries from 2000 to 2023. Using panel-corrected standard errors and two-stage least squares (2SLS) estimations, the analysis reveals that transitioning towards a service-based economy significantly improves VAT efficiency. Specifically, increases in the service sector’s share of employment and value added positively affect VAT efficiency, suggesting that economies shifting from agriculture to services experience more effective VAT collection. Conversely, higher standard VAT rates consistently reduce VAT C-efficiency across various models. Additionally, the study finds that government effectiveness and higher real GDP per capita are positively associated with VAT efficiency. However, rapid urbanization, trade openness, and agricultural value added have a detrimental impact on VAT efficiency, highlighting areas where VAT systems may encounter challenges.