Effect of the Quality of Institutions on Fiscal Pressure in the Countries of the West African Economic and Monetary Union (WAEMU): Evidenced by Informal Sector Channel

Abstract

This paper aims to analyze the effects of the quality of institutions on the total tax burden through the informal sector in WAEMU countries over the period 1996-2015. The estimation of the parameters by GMPs shows that the improvement in the quality of the institutional environment reduces the size of the informal sector and this reduction in the size of the informal sector in turn leads to an increase in the tax burden rate. It also shows that the level of development and trade openness improve the total tax burden of WAEMU countries, while inflation, the share of agriculture and the informal sector in GDP reduce the total tax burden. As for the share of natural resources in GDP, its effect on fiscal pressure is ambiguous because it varies according to the indicator used to measure the quality of institutions in the regression.

Keywords: Tax pressure, Informal sector, Institutions, WAEMU

DOI: 10.7176/JESD/11-20-12

Publication date:October 31^st 2020