How do states in a low-tax, low-capacity equilibrium spur citizens to start paying taxes? This experiment would examine the direct and network effects of an increase in tax enforcement by the government on tax compliance. We partner with the Provincial Ministry of Taxation and randomly assign firms in the city of Kananga, DRC, to one of two tax enforcement treatment conditions, or a control condition. In the first treatment group, non-compliant firms will receive a visit from tax collectors to remind them about their “patente” tax rate and inform them about the penalties they face if they fail to pay on time. In the second treatment group, non-compliant firms will receive the same visit. However, if they still have not paid after a month they will receive a subsequent visit from a tax collector and a tax bailiff who will close their business until the “patente” tax and the tax penalties are paid. We primarily plan to study the direct and network effects of this increase in tax enforcement on tax compliance and beliefs about enforcement. We would also study the direct and network effect of these interventions on trust in the provincial government, bribes paid to the tax collectors as well as firms’ economic activity.
Completed Project