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Journal of Economic Integration 2016 December;31(4) :932-967.
DOI: https://doi.org/10.11130/jei.2016.31.4.932
Regional Economic Integration and Tax Revenue: East African Community
John Bosco Nnyanzi
Peter Babyenda and 
John Mayanja Bbale 
Makerere University, Kampala, Uganda
Makerere University, Jinja Campus, Uganda
Corresponding Author: John Bosco Nnyanzi ,Tel: +256 772 493 223, Email: jbnnyanzi@yahoo.com
Copyright ©2016 Journal of Economic Integration
ABSTRACT
The ultimate goal of regional integration is the long-term high economic growth for member states. Tax revenues are critical to achieving this objective, given the high dependence of developing countries on this fiscal revenue. However, empirical studies have been unable to determine whether regional integration improves or impedes the mobilization of taxes. We use data from 1980 to 2014 in order to estimate a tax model; the results based on the generalized method of moments technique reveal that East African regional integration has had a significant impact on tax revenue owing to the presence of good institutions. We advocate any policy agenda aimed at improving institutional environment, financial sector, macroeconomic stability, and manufacturing and trade, as well as a well-integrated approach to reduce a shadow economy. Finally, given the deleterious nature of capital account liberalization, we believe that cautiously designed capital control policies are likely to enhance tax collections in East Africa.

JEL Classification
E62: Fiscal Policy
F15: Economic Integration
E26: Informal Economy; Underground Economy
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O55: Africa
O11: Macroeconomic Analyses of Economic Development
Keywords: Tax revenue | Regional Integration | Institutional Quality | Capital account liberalization | Shadow economy | East African Community
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