Does natural resource hinder, taxation capacity and accountability: A case of selected oil abundant developing countries
- Journal of Social and Economic Development
- 26(2), Aug, 2024: p.499-520
This article investigates whether natural resource abundance, particularly oil wealth, hinders taxation capacity and accountability in developing countries. Drawing on the “resource curse” literature, the study highlights how reliance on resource rents often reduces incentives for governments to build robust taxation systems, thereby weakening fiscal institutions. Oil revenues, while substantial, can foster rentier state dynamics where governments prioritize resource extraction over broad-based taxation, diminishing accountability to citizens. Using selected oil-abundant developing countries as case studies, the paper employs comparative analysis to examine how resource dependence correlates with weak tax capacity, governance deficits, and limited citizen engagement. The findings suggest that resource wealth, without institutional safeguards, undermines fiscal accountability and perpetuates economic vulnerability. By situating this inquiry within debates on public finance, governance, and development economics, the article underscores the need for reforms that diversify revenue sources, strengthen taxation systems, and enhance accountability mechanisms in resource-rich states. Study aims to explore the mechanism that corroborates the political-economy explanation of the resource curse in oil rich developing countries. This mechanism elucidates that increasing resource rents provides higher incentives for leaders to remain in power, through a deliberate refusal to improve taxation capacity, which would, in turn, reduce the tax burden on its citizens to reduce their demand for accountability. Using a panel data set for 25 oil producing developing countries for the period 1996–2011, the study demonstrated that oil abundant developing countries lack adequate taxation capacity which influences fiscal contract through taxation of the citizens and minimises the scrutiny of government and the demand for accountability. In turn, the economy is plagued by inadequate provision of public goods and a limited means to raise revenue to finance government expenditure. The empirical analysis supports this mechanism. To this regard, it concludes that the presence of oil in the selected countries can undermine accountability.- Reproduced