ICTD Working Paper 82

The widespread introduction of information and communication technologies (ICTs) and digitalised data management systems is one of the most important developments among African tax administrations in recent years. However, very little evidence is available on their effectiveness in practice, and how taxpayers respond to these changes. This paper starts filling this gap by reporting three sets of results from Ethiopia. First, we show that the available data is still not used to its full potential, despite modern ICT systems being in place. Second, we find that a technological innovation, the introduction of electronic sales registration machines (SRMs), had a positive impact on both tax revenue and the accuracy of tax records. However, taxpayers responded to the machines by simultaneously adjusting both reported income and deductible costs, thus reducing the potential revenue gains. Third, we use a letter experiment to show that the main mechanism through which the SRMs increase tax revenue is tax compliance, rather than any change in real business activity.


Giulia Mascagni

Giulia Mascagni is a Research Fellow at the Institute of Development Studies and Research Director of the ICTD. Her main area of work is taxation, but she also has research interest in public finance, evaluation of public policy, and aid effectiveness. She is an economist by training, holding a PhD in Economics from the University of Sussex. Her main geographical interest lies in African countries, with a particular focus on Ethiopia and Rwanda.

Andualem T. Mengistu

Andualem Mengistu is a Technical Advisor at the IMF Fiscal Affairs Department and Director at the Macroeconomic Division at the Ethiopian Development Research Institute.

Firew B. Woldeyes

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