IMPACT OF TAXATION ON HOUSEHOLD CONSUMPTION EXPENDITURES IN SELECTED WEST AFRICAN COUNTRIES

Abstract

Purpose. This study examines the impact of taxation on household consumption expenditure in West Africa and evaluates whether the region’s tax structure exerts pressure on household spending patterns.

Design/methodology/approach. The research adopts an ex-post facto design using panel data from five West African countries. Data were obtained from the OECD database and analyzed using the Panel Autoregressive Distributed Lag (ARDL) model to capture both short-run and long-run dynamics between taxation variables and household consumption.

Findings. The results reveal that direct taxes have a negative and significant effect on household consumption expenditure, while indirect taxes exhibit a more nuanced and less consistent impact. Inflation shows a significant positive relationship with consumption, whereas exchange rate and GDP per capita exert insignificant downward pressure. These findings suggest that taxation policies, particularly direct taxation, influence household financial capacity and consumption behavior in the region.

Originality. This study contributes to the literature by providing a comprehensive regional analysis of taxation-consumption dynamics, incorporating both direct and indirect taxes within a unified framework. It offers new empirical insights into fiscal policy effects in West Africa and provides evidence to support tax policy reforms aimed at balancing revenue generation with household welfare.

Keywords: Direct tax; Indirect tax; Inflation; Exchange rate; Gross domestic product per capita