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Does transparency pay ? The impact of EITI on tax revenues in resource-rich developing countries

Abstract : This paper assesses the "treatment effect" of the Extractive Industries Transparency Initiative (EITI) membership on tax revenues through two main channels. The first (direct) works through an equitable and transparent resource tax regime. The second is the indirect effect EITI has on non-resource revenue once transparency enhances accountability and resource allocation to productive expenditures. Based on a sample of 83 resource-rich developing countries (44 EITI and 39 non-EITI) for the period from 1995 to 2017, we use propensity score matching (PSM) methods developed in the treatment effect literature to address the self-selection bias associated with EITI membership (the dates of countries' commitment, candidacy, and compliance). Results show that EITI commitment and/or candidates have significant and positive effects on tax revenue collection, compared to non-EITI (on average 1.06 to 1.20 percentage points), and the EITI compliance generates a considerable surplus of tax revenues (on average 1.09 to 1.13 percentage points of GDP), compared to non-compliant (commitment and candidate). Besides, the magnitudes of the effects are greater and more significant if we include governance indicators. The results are robust, with a more significant increase in non-resource tax revenues and income tax. The paper reveals that EITI members have higher levels of tax revenue than nonmembers and that tax revenue is higher when countries are compliant with the initiative, even higher with quality of governance, and heterogeneous due to structural factors.
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https://hal.uca.fr/hal-03208955
Contributor : Harouna Kinda Connect in order to contact the contributor
Submitted on : Tuesday, April 27, 2021 - 1:29:10 AM
Last modification on : Tuesday, September 14, 2021 - 4:44:01 PM

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Harouna Kinda. Does transparency pay ? The impact of EITI on tax revenues in resource-rich developing countries. 2021. ⟨hal-03208955⟩

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