Resource blessing, revenue curse? Domestic revenue effort in resource-rich countries

•The paper analyzes revenue substitution for 35 resource-rich countries.•A new dataset identifies non-resource revenue for the main taxes.•Substitution between natural resources and total tax revenue is confirmed.•Largely offset are taxes on goods and services-in particular the VAT.•Results suggest that growth-friendly taxes are offset the most.

This paper uses a newly constructed revenue dataset of 35 resource-rich countries for the period 1992-2009 to analyze the impact of expanding resource revenues on different types of domestic (non resource) tax revenues. Overall, we find a statistically significant negative relationship between resource revenues and total domestic (non resource) revenues, including for the major tax components. For each additional percentage point of GDP in resource revenues, there is a reduction in domestic (non resource) revenues of about 0.3 percentage points of GDP. We find this primarily occurs through reduced effort on taxes on goods and services-in particular, the VAT-followed by a smaller negative impact on income and trade taxes.