Citation:

Akpeng Banizi, Dr. Bernard Baimwera, Dr. Collins Kapkiai. "Analysing the Effects of Macroeconomic Factors on The Value-Added Tax Revenue Performance in Togo: The Moderating Role of Control of Corruption" International Research Journal of Economics and Management Studies, Vol. 4, No. 9, pp. 143-154, 2025. Crossref. http://doi.org/10.56472/25835238/IRJEMS-V4I9P116

Abstract:

The VAT is a key source of government revenue, particularly in developing economies. However, the VAT Gap in Togo remains substantial, impacting tax revenue performance. Although researchers have examined either the VAT revenue performance or the determinants of the VAT Gap in Togo, they have not addressed macroeconomic factors and the moderating effect of governance factors. This study examines the impact of macroeconomic factors, including economic growth, inflation, and unemployment, on the performance of Value-Added Tax (VAT) revenue in Togo, while also investigating the moderating role of corruption control. The study is motivated by the persistent VAT Gap in Togo, as reflected in the relatively low average C-efficiency ratio of 44%, significantly below the OECD average of 58%, despite steady economic growth and tax administration reforms. Employing an explanatory research design and utilizing a quantitative approach to analyze annual time-series data spanning from 1996 to 2024, the study employs both descriptive and inferential statistical methods. Data were obtained from the World Governance Indicators (WGI) and World Development Indicators (WDI) of the World Bank, Central Bank of West African States (BCEAO), and the Ministry of Finance of Togo. The results of model 1 demonstrate that economic growth has a strong and statistically significant positive impact on VAT performance. Furthermore, the implementation of the Togolese Revenue Authority significantly improved VAT collection efficiency, highlighting the importance of institutional reform. In contrast, inflation and unemployment were found to have statistically insignificant effects on VAT performance in the Togolese context. Critically, the study reveals that corruption control significantly moderates the relationship between economic growth and VAT performance, enhancing the effectiveness of economic growth in improving tax outcomes. However, no significant moderating effects were found between corruption control and either inflation or unemployment. The study is grounded in the Keynesian Theory of Taxation, the institutional trust theory, and the Laffer Curve Theory, and recommends inclusive economic growth and broader administrative and governance reforms. The study also proposes further research on additional institutional variables and comparative regional analyses to deepen the understanding of VAT performance dynamics in sub-Saharan Africa.

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Keywords:

Value-Added Tax (VAT) revenue, Macroeconomic factors, Corruption control, Fiscal Performance, Tax Policy, Revenue Mobilization, Public Finance.