Understanding the drivers of tax compliance is a major concern for academics and policymakers alike, especially in low-income countries where revenue mobilisation is crucial for sustainable provisions of vital public services. Despite the ever-growing interest in taxation research in the global South, the existing literature often considers the taxpayer-government relationship as a bilateral one. In practice, however, taxpayers often face multiple payment obligations, and towards more than one tier of government or enforcement agency (e.g. local and national). In contexts of limited tax coordination between levels, compliance might be complementary or conflicting.
This project is motivated by the conspicuous lack of economic theories and evidence on tax compliance in multilevel tax systems. It aims to address this gap through a large project in Kampala, Uganda, in close collaboration with the Kampala City Authority (KCCA) and the Uganda Revenue Authority (URA) – the local and national tax agencies.
It aims to address this gap in three ways: 1) studying the extent of non-compliance with local and national taxes among firms in Kampala; 2) quantifying the resulting distributional effects of tax non-compliance; and 3) assessing the spillovers in compliance behaviours through a large-scale tax message experiment.
The crucial innovation of this project is that by matching administrative data, there is a rare opportunity to explore patterns of illicit tax behaviours by small and medium firms in the past five years, understand the drivers and implications of non-compliance in a multi-tier tax enforcement system, and explore mechanisms that could sustain revenue mobilisation both at the local and national levels.