On the Relationship Between Corruption Perception and Tax Morale: Does Natural Resource Abundance Matter?

Using data from the latest wave of the Afrobarometer surveys, the study examines the heterogeneous effect of corruption perception on tax morale across resource-rich and poor countries in Africa. The study finds that perceived levels of corruption among public officials reduce tax morale in Africa. For instance, a one-unit increase in the number of public officials perceived to be corrupt leads to a 0.4% reduction in an individual’s tax morale. The tax morale-reducing effect of corruption perception is, however, heterogeneous across resource-rich and resource-poor countries in Africa. Specifically, the availability of natural resources (and their exploitation) in a country attenuates the tax morale-reducing effect of corruption perception in Africa. This implies that policies to deepen domestic revenue mobilization must be context-specific. That is, while improving the quality of governance would help to improve tax morale, tax compliance, and ultimately tax revenues in resource-poor countries, the case is not the same for resource-rich countries wherein there is an absence of a fiscal-social contract built through taxation unlike in resource-poor countries. In resource-rich countries, therefore, improving tax morale and voluntary tax compliance would require a combination of an improvement in governance quality and a shift from the over-dependency on rents from natural resource exploitation in funding public expenditures to making taxation a key source of government revenues for funding public spending.