Using a panel threshold model, we examine the heterogeneous effects of foreign aidon tax revenue due to government stability in the West African Economic andMonetary Union countries over the period 1986–2010. Panel Smooth ThresholdRegressions indicate the existence of strong threshold effects in the aid–tax relationshipdepending on the level of government stability. They also indicate that the effectof aid on tax revenue is gradual and varies across countries according to the level ofgovernment stability. We find that aid directly reduces tax revenues but for higherlevels of government stability it enhances tax performance. We provide estimatesof country time-varying coefficients of aid effect. We find on average a positiveimpact of aid. However, the size of this impact is very small, suggesting that thereis still much to do at the institutional level to improve the effectiveness of aid fortax performance in WAEMU countries.