Effect of the Quality of Institutions on the Tax Structure in West African Economic and Monetary Union Countries (WAEMU)

The objective of this paper is to analyze the effect of the quality of institutions on the different types of tax revenues, in particular on the total tax revenue, the direct tax revenue, the domestic indirect tax revenue and the trade tax revenue. The econometric analysis used the Pooled Mean Group (PMG) estimator over the period from 1996 to 2015. The results of the estimates show that in the WAEMU zone, the quality of institutions has a positive and significant effect on all types of tax revenues except for trade tax revenue. These results are robust because they do not change according to the different indicators used to measure the quality of institutions. Furthermore, overall, GDP per capita positively and significantly affects total and indirect domestic tax revenue, while it has a negative effect on direct tax revenue. Trade openness has a positive and significant effect on all types of tax revenues, except for indirect domestic tax revenue. The share of agriculture has a positive and significant effect on all types of revenue except trade tax revenue. Inflation has a negative and significant effect on all types of tax revenues. The share of natural resources and the size of the informal sector show mixed results.