Fawzi Banao

How do remittances impact domestic taxes revenues in countries affected by ethnic conflict?

Abstract

This paper analyzes the impact of remittances inflows and ethnic conflict onset on domestic taxes in African countries. We find a positive marginal effect of the onset of ethnic conflict on remittances impacts both direct and indirect taxes revenues. Indeed in countries affected by war, the government raises state capacity to levy more tax revenues. Consequently, the remittances inflows are more absorbed in domestic taxes revenues through direct and indirect taxes during the war. Also, our findings show that globalization improves the impact of remittances inflows on domestic taxes in countries affected by ethnic conflict.

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