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Journal of African Economies Advance Access published online on June 14, 2006
Journal of African Economies, doi:10.1093/jae/ejl022
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© The author 2006. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved

Article

Shifting Tax Burdens through Exemptions and Evasion: an Empirical Investigation of Uganda

Bernard Gauthier 1 * and Ritva Reinikka 2

1 Institut d'économie appliquée, HEC Montréal, 3000 Chemin Côte-Ste-Catherine, Montréal (Québec), Canada H3T 2A7
2 The World Bank, Washington, DC, USA

* To whom correspondence should be addressed.
Bernard Gauthier, E-mail: bernard.gauthier{at}hec.ca


  Abstract

This paper investigates the impacts of tax reforms implemented in Uganda in the mid-1990s on the prevalence of tax evasion and exemptions among firms, and their effects on the distribution and dispersion of tax burdens. Based on firm-level data collected from 243 firms, we observe that evasion and exemptions were widespread and that their prevalence actually increased during tax reforms. We use three-stage least squares to simultaneously estimate tax burdens, evasion and exemption patterns in 1995 and 1997. We find that tax exemptions benefit large businesses to a disproportionate degree, while evasion is more common among small businesses. This creates a situation in which medium-sized firms shoulder a disproportionate tax burden.


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