PhD Defence: Abdramane Camara

Development Financing: Four Essays on External Financing and Domestic Revenue Mobilization in Developing Countries

Composition du jury 

Renard Mary-Françoise, Professor, Université Clermont Auvergne
Brana Sophie, Professor, Université du Bordeaux
Savoia Antonio, Senior Lecturer, University of Manchester (United Kingdom)
Ballo Zié, Professor, Université Houphouët Boigny (Côte d’Ivoire)
Brun Jean-François, Associate Professor, Université Clermont Auvergne

Abstract

The achievement of the 17 goals of the 2030 Agenda by developing countries (DCs) is threatened by a considerable financing gap faced by these countries. Thus, domestic resource mobilisation and external financial flows are essential for financing these development goals. Hence, the financing of development in developing countries is at the heart of this thesis. Accordingly, we have divided the thesis into two parts. Chapter 1 analyses the relationship between financial development and non-resource tax revenues in developing countries. Three significant findings emerge from this chapter. First, financial development has a non-linear impact on non- resource tax revenue mobilisation in developing countries in both the long and short run. However, the development of financial institutions affects non-resource tax revenues only in the long run. Furthermore, our results indicate that institutional characteristics are significant for the relationship between tax revenue and financial development. These findings suggest that a wide range of policies focusing on financial development as a channel for tax revenues is only helpful if there is attention and goodwill for the rule of law and anti-corruption actions. Finally, the government could encourage direct taxation with financial tools.

Chapter 2 looks at the impact of South-South cooperation on non-resource tax revenues in Africa, focusing on Chinese aid to Africa. Our estimation results indicate that Chinese aid encourages non-resource tax revenue mobilisation in Africa. In terms of policy implications, these results help to inform policymakers that South-South cooperation is essential for increasing economic infrastructure and thus improving tax compliance to boost non- resource tax revenue mobilisation in Africa.

Chapter 3 examines the impact of foreign direct investment (FDI) on tax revenue mobilisation empirically in developing countries. Two significant findings emerge from this chapter. First, foreign direct investment positively impacts tax revenue mobilisation in developing countries. However, our results indicate that FDI does not statistically influence tax revenue mobilisation in resource-exporting economies. In terms of policy, this work shows that the promotion of FDI through tax incentives should consider the role of tax evasion. The results also suggest that it is necessary to substitute or combine these policies with non-tax measures such as subsidies to foreign investors, improvement of the institutional environment, and infrastructure development to attract FDI without a significant loss of tax revenue. In addition, countries should also consider the crucial role of natural resources, agriculture and trade openness in mobilising tax revenues.

Finally, Chapter 4 analyses the effectiveness of CIT rate reductions in FDI inflows from gold and silver in Africa. These results indicate that reductions in CIT applied to mining companies will not necessarily attract FDI to gold and silver projects. Furthermore, we find a strategic complementarity in gold and silver FDI flows between countries, suggesting that an increase in host country FDI flows can stimulate FDI projects in neighbouring countries in these sectors. Furthermore, the results show that infrastructure, government stability, and gold and silver reserves positively impact FDI inflows into these sectors. The main results suggest the need for developing countries to improve the economic landscape of tax collection through financial development and South-South cooperation, improving the quality of institutions and the economic infrastructure of their economies for better mobilisation of non-resource tax revenues. These efforts must be complemented by better management of natural resource revenues for productive investment to support economic growth and streamlining tax incentives to attract foreign investors in the mining sector to limit net tax reve

Keywords

Non-resource tax revenues, Financial Development, Chinese aid, institutional quality, Foreign Direct Investment, Developing countries.