Abstract:
Most Sub-Saharan African countries (SSA) have shown excessive dependence on foreign
financing which with time, has led to financial debts and sustainability. Also, most Sub-Saharan
African (SSA) economies have had to look for methods to increase tax revenue that will be able
to fund public expenditures and ultimately narrow the shortage. A key factor for economic
development in most developing economies is an effective tax system. The study used timeseries data for thirty-six years from 1980 to 2015, collected from published economic reports
and World Development Indicators Report (2016) with various measures. This study uses data
for Namibia and South African countries from 1970-to 2015 to compare the tax ratios and to
build an index of tax effort for the two countries. The index of the tax effort is constructed as the
ratio of the actual tax share to the predicted (or potential) tax share. Results indicated that in
Namibia, services value added % of GDP was statistically significant at 5 %. Also GDP per
capita was significant at 1% level of significance. In South Africa export share % of GDP was
significant at 5% level of significance while GDP per capita was significant at 10% level of
significance. The export share seems to have a strong and direct relationship with tax share.
The study concludes that establishing the tax effort index, according to the actual revenues of a
country to its estimated taxable amount, gives us a tempting quantity that determines countries
specific fiscal, institutional and demographic traits.
