The Paradox of Taxation and Development in Ivory Coast: An Empirical Inquiry into High Tax Burdens amidst Low Development Outcomes
Abstract
The paradox of taxation and development refers to a puzzling phenomenon where high tax burdens do not necessarily translate into commensurate economic development. This study investigates the existence and nature of this paradox in the Ivory Coast using quarterly time-series data from 2001 to 2024. Employing secondary data obtained from the World Bank, the study applies the Auto Regressive Distributed Lag (ARDL) model to examine the dynamic relationship between taxation and economic development. GDP per capita growth (annual%) is used as the dependent variable, while the independent variable is taxes on income, profits, and capital gains (% of revenue). Empirical results reveal a statistically significant positive relationship between GDP per capita growth and its first lag (coefficient = 0.703779), indicating economic growth persistence. Additionally, taxes on income, profits, and capital gains exhibit a statistically significant positive short-run impact (coefficient = 0.406910), but a negative and significant coefficient on its first lag (-0.392855). This mixed effect reflects the paradox: while taxation may initially support development through increased public revenues, its lagged impact may constrain long-term growth, possibly due to inefficiencies in public spending or distortions in private investment incentives. Diagnostic tests confirm robustness of the ARDL model, showing no evidence of serial correlation, heteroscedasticity, or cointegration issues. Based on these findings, we recommend enhancing the efficiency and transparency of public expenditure, reforming tax policy to minimise economic distortions, and aligning fiscal policy with inclusive development priorities to bridge the gap between tax collection and development outcomes in the Ivory Coast
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Copyright (c) 2025 Kagarura Willy Rwamparagi, Nahabwe Patrick Kagambo John
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