Research in Brief 181
Revenue authorities across Africa face a difficult problem: how to tax small businesses in ways that raise revenue, support formalisation, and maintain trust. Traditional enforcement is often expensive when businesses are small, hard to monitor, and contribute little individually to total revenue. For this reason, many tax authorities are turning to lower-cost approaches, including taxpayer education, outreach visits and facilitative engagement.
New evidence from Tanzania shows that outreach is not automatically trust-building. Even the benign presence of tax officials can have different effects depending on where it occurs. In richer, more economically integrated regions, visibility can strengthen trust and compliance. In poorer and more marginalised regions, the same presence can reduce trust and lower tax payments.
