Effect of Tax Rates on Industrial Profits on Industrial Production in Sub-Saharan Africa

Authors: Mingnimon Ghislain Gnidehou & Alastaire Sèna Alinsato

ISSN: 2709-8575
Affiliations: Laboratoire d’Economie Publique (LEP), Faculté des Sciences Economiques et de Gestion, Université d’Abomey-Calavi, Benin; Laboratoire d’Economie Publique (LEP), Faculté des Sciences Economiques et de Gestion, Université d’Abomey-Calavi, Benin
Source: African Multidisciplinary Tax Journal, 2024 Issue 2, p. 18–36
https://doi.org/10.47348/AMTJ/V4/i1a2

Abstract

This paper analyses the effect of the tax rate on industrial profits on industrial production in sub-Saharan Africa. A Seo and Shin dynamic threshold panel model was specified and estimated for this purpose. Using data from the World Bank (WDI) over the period 2005–2021, the results from the estimation of the dynamic threshold model show that there is a threshold from which the effect of the tax rate on profits of industries becomes negative on industrial value added. This is a threshold of 20,47% of the tax rate on industrial profits. Beyond this threshold, the effect of the rate of this type of tax becomes negative on industrial production in Sub-Saharan Africa, precisely in the 25 countries taken into account in this study. The study therefore recommends the implementation of policies favourable to broadening the tax base and moderate tax rates.