Tax

===Key facts===
The below facts were compiled by EPS PEAKS researchers:<ref name="Economics Topic Guide Taxation and Revenue" />
* [[Trade liberalization]] has led to a decline in trade taxes as a share of total revenues and GDP.<ref name="Economics Topic Guide Taxation and Revenue" /><ref name="Revenue Mobilisation in Sub Saharan Africa Challenges from Globalisation I Trade Reform">{{cite journal |last1=Keen |last2=Mansour |year=2010 |title=Revenue Mobilisation in Sub-Saharan Africa: Challenges from Globalisation I – Trade Reform |journal=Development Policy Review |volume=28 |issue=5 |pages=553–71 |doi=10.1111/j.1467-7679.2010.00498.x|s2cid=153915109 }}</ref>
* Resource-rich countries tend to collect more revenue as a share of GDP, but this is more volatile. Sub-Saharan African countries that are resource-rich have performed better tax collecting than non-resource-rich countries, but revenues are more volatile from year to year.<ref name="Revenue Mobilisation in Sub Saharan Africa Challenges from Globalisation I Trade Reform" /> By strengthening revenue management, there are huge opportunities for investment for development and growth.<ref name="Economics Topic Guide Taxation and Revenue" /><ref>See for example Paul Collier (2010), The Political Economy of Natural Resources, social research Vol 77: No 4: Winter 2010.</ref>
* Developing countries have an informal sector representing an average of around 40%, perhaps up to 60% in some.<ref>Schneider, Buehn, and Montenegro (2010), Shadow Economies all over the World: New Estimates for 162 Countries from 1999 to 2007.</ref> Informal sectors feature many small informal traders who may not be efficient in bringing into the tax net since the cost of collection is high and revenue potential limited (although there are broader governance benefits). There is also an issue of non-compliant companies who are "hard to tax", evading taxes and should be brought into the tax net.<ref name="Economics Topic Guide Taxation and Revenue" /><ref name="IMF 2011">IMF, 2011, Revenue Mobilization in Developing Countries, Fiscal Affairs Department</ref>
* In many low-income countries, the majority of revenue is collected from a narrow tax base, sometimes because of a limited range of taxable economic activities. There is therefore dependence on few taxpayers, often multinationals, that can exacerbate the revenue challenge by minimizing their tax liability, in some cases abusing a lack of capacity in revenue authorities, sometimes through [[Transfer pricing|transfer pricing abuse]].{{elucidate|date=November 2013}}<ref name="Economics Topic Guide Taxation and Revenue" /><ref name="IMF 2011" />
* Developing and developed countries face huge challenges in taxing multinationals and international citizens. Estimates of tax revenue losses from evasion and avoidance in developing countries are limited by a lack of data and methodological shortcomings, but some estimates are significant.<ref name="Economics Topic Guide Taxation and Revenue" /><ref>See Section 3 'International Taxation' e.g. Torvik, 2009 in Commission on Capital Flight from Developing Countries, 2009: Tax Havens and Development</ref>
* Countries use incentives to attract investment but doing this may be unnecessarily giving up revenue as evidence suggests that investors are influenced more by economic fundamentals like market size, infrastructure, and skills, and only marginally by tax incentives (IFC investor surveys).<ref name="Economics Topic Guide Taxation and Revenue" /> For example, even though the [[Government of Armenia]] supports the IT sector and seeks to improve the investment climate, the small size of the domestic market, low wages, low demand for productivity enhancement tools, financial constraints, high software piracy rates, and other factors make growth in this sector a slow process. Meaning that tax incentives do not contribute to the development of the sector as much as it is thought to contribute.<ref>[https://www.export.gov/article?id=Armenia-information-technology], Armenia – Information Technology</ref> Support towards the IT industry and tax incentives were established in the 2000s in [[Armenia]], and this example showcases that such policies are not the guarantee of rapid economic growth.<ref>[https://futurearmenian.com/wp-content/uploads/2021/08/Armenian-ICT-Sector-State-Of-The-Industry-Report.pdf], Armenian ICT Sector State Of The Industry Report</ref>
* In low-income countries, compliance costs are high, they are lengthy processes, frequent tax payments, bribes and corruption.<ref name="Economics Topic Guide Taxation and Revenue" /><ref name="IMF 2011" /><ref>'Doing Business 2013', World Bank/IFC 2013</ref>
* Administrations are often under-resourced, resources are not effectively targeted on areas of greatest impact, and mid-level management is weak. Coordination between domestic and customs is weak, which is especially important for VAT. Weak administration, governance, and corruption tend to be associated with low revenue collections (IMF, 2011).<ref name="Economics Topic Guide Taxation and Revenue" />
* Evidence on the effect of aid on tax revenues is inconclusive. Tax revenue is more stable and sustainable than aid. While a disincentive effect of aid on revenue may be expected and was supported by some early studies, recent evidence does not support that conclusion, and in some cases, points towards higher tax revenue following support for revenue mobilization.<ref name="Economics Topic Guide Taxation and Revenue" />
* Of all regions, Africa has the highest total tax rates borne by the business at 57.4% of the profit on average but has reduced the most since 2004, from 70%, partly due to introducing VAT and this is likely to have a beneficial effect on attracting investment.<ref name="Economics Topic Guide Taxation and Revenue" /><ref>Paying Taxes 2013: Total tax rate is a composite measure including corporate income tax, employment taxes, social contributions, indirect taxes, property taxes, and smaller taxes e.g. environmental tax.</ref>
* Fragile states are less able to expand tax revenue as a percentage of GDP and any gains are more difficult to sustain.<ref>IMF Working Paper 108/12 (2012), Mobilizing Revenue in Sub-Saharan Africa: Empirical Norms and Key Determinants</ref> Tax administration tends to collapse if conflict reduces state-controlled territory or reduces productivity.<ref>African Economic Outlook (2010)</ref> As economies are rebuilt after conflicts, there can be good progress in developing effective tax systems. [[Liberia]] expanded from 10.6% of GDP in 2003 to 21.3% in 2011. [[Mozambique]] increased from 10.5% of GDP in 1994 to around 17.7% in 2011.<ref name="Economics Topic Guide Taxation and Revenue" /><ref>IMF Revenue Data, 2011: Total Tax Revenue as a percentage of GDP</ref>