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Abstract
This paper contributes to a growing strand of literature on the determinants of tax revenue performance in developing
countries, particularly in Sub-Saharan Africa. More specifically we estimate the tax elasticities of sectoral output
growth and public expenditure. The unique features of this paper are twofold: First we develop a simple analytical
model for tax revenue performance taking into account some structural features pervasive in most developing
countries with large informal sectors. Second we test the model predictions on Ugandan time series data using
ARDL bounds testing techniques. Results indicate that dominance of the agricultural and informal sectors pose
the largest impediments to tax revenue performance. In addition development expenditures, trade openness, and
industrial sector growth are positively associated with tax revenue performance. We propose policies to support
the development of value added linkages between agricultural and industrial sectors while emphasizing the need
to unlock the potentially large contributions of the informal sector with a view of widening the tax base.