Financing poverty reduction and inequality in Africa: Debates focus on tax morale and structure of housing finance

03/11/2015
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“Tax morale and trust in public institutions” and “Housing finance and inclusive growth in Africa” were the topics of two papers presented by a group of researchers and economists on Tuesday, November 3, 2015 in Kinshasa. Debates focused on these topics, which some participants also described as issues impinging the continent’s development. The discussants of the session, were Athanasius Coker of the African Development Bank, and United Nations Development Programme’s Country Economist for Benin, El Hadji Fall.

In the first presentation by Wilfried Anicet Kouame, “Taxes mechanisms and its obligations” were discussed. The study explained why some citizens pay their taxes and others don't. It also addressed the reasons for so many differences in tax compliance across countries.

Building on examples across Africa, the author concluded that the decision to adhere to tax obligations by individuals is a complex decision motivated by several factors, the most prominent of which is confidence by taxpayers in public institutions. 

The evidence shows that the impact of confidence in public institutions on tax morale is higher in advanced countries than in developing countries. The study shows that actions and signals emitted by public institutions affect the taxpayers’ intrinsic motivation to pay their taxes. The policy implication that emerges is to enhance the taxpayers’ trust in public institutions through positive actions.

In the second paper, the authors Christian-Lambert Nguema; F. Tchana Tchana and Albert Zeufack displayed models analyzing the structure of housing finance in Africa, its determinants, and its impact on inclusive growth. Based on household data, the investigation finds that market capitalization and urbanization are key positive determinants of housing finance.

The results suggests that housing finance development in Africa is not yet an effective tool for inequality reduction, given that it remains at a very early stage. However, it shows that above a given threshold, housing finance could be efficient. The author also argued that housing finance is loosely positively related to greater economic development in Africa. The findings suggest that policies to boost housing finance development in Africa should be viewed as measures that would provide benefits in the medium to long term.