Taxation and Income Inequality in Sub-Saharan Africa: A Historical Comparative Analysis

High levels of income inequality hinder poverty reduction. With income inequality increasing in sub-Saharan Africa, there is a push in both academic and policy circles for African governments to raise more taxes to fund much-needed public investments to reduce inequality. However, in many sub-Saharan African countries additional public revenue has not been translated into valuable goods and services that improve public welfare and reduce inequality. Women, the poor, and other marginalized groups often bear the heaviest tax burdens and yet receive little in return. So, in such contexts, the most important reform challenge may lie not in expanding revenue, but in designing strategies that contribute to wider benefits from taxation and to empower taxpayers to make this possibility a reality.
The aim of this project is to understand the conditions that promote more effective use of tax revenue for reducing inequality using a historical-comparative approach. The project identifies factors that explain differences in the inequality-reducing role of taxation and strategies that are more likely to promote broader gains from taxation across time and space. We pay attention to power and political relationships and the ability of different actors, interest groups and taxpayers to demand fairer tax systems and greater benefits from governments. We focus on eight countries (Botswana, Mauritius, Zimbabwe, Malawi, Ghana, Kenya, Uganda, Ethiopia). For each country, we conduct an econometric analysis of the relationship between taxes and inequality and construct analytical narratives of the political economy of taxation to identify context specific factors that underpin the relationship between taxation and income inequality.
The project will provide a solid analysis that will be instrumental for donor agencies, policy makers and civil society actors who are today looking for the best way to translate increased taxation into more inclusive and sustainable development.