Plenary Theme: COVID-19 and Public Finance in Africa: Challenges and Opportunities

Abstract

Public finance plays an important role in the process of economic development. It is concerned with the capacity of governments to mobilise resources primarily for building institutions to promote security, competition and market development, as well as for redistributive purposes. Stylised facts indicate the capacity of governments to mobilise tax and economic development evolve together (Besely and Presson, 2014; Slemrod, 2019). Typically, countries mobilise more taxes per dollar of GDP as they become richer and vice versa (Besely and Presson, 2014). For the sample of African countries, the same pattern is observed where relatively poorer countries tend to mobilise lower taxes as a share of GDP compared with high-income countries. Figure 1 uses four country groupings to categorise African countries and tax mobilisation, which in tandem tend to be highly correlated with income groupings1. Broadly speaking, the factors that tend to affect capacity of governments to mobilise taxes fall into two categories. One is the structure of the economy, which is dependent on the stages of economic development, and the other is the institutional arrangements shaped by history and political economy. However, both factors feed each other to a degree (Besely and Presson, 2014; Slemrod, 20