IDS Working Paper 429

Recent years have witnessed significantly increased attention to the challenge of taxing small businesses in the informal sector. However, much of this recent attention has remained focused on comparatively technical issues of revenue maximisation and policy design. This paper argues that this debate should focus increasingly on the wider development implications of informal sector taxation, as well as the political and institutional barriers to improved performance. When considering the merits of committing scarce resources to taxing small informal sector firms, debate has frequently focused on limited revenue potential, high costs of collection and potentially perverse impacts on small firms. By contrast, recent arguments have increasingly emphasised more indirect benefits of informal taxation in relation to economic growth, tax compliance and governance.

Authors

Anuradha Joshi

Anuradha Joshi is a social scientist with a PhD in Public Policy from the Massachusetts Institute of Technology, USA with extensive experience in policy processes and institutional analysis. She is also a Professorial Fellow at the Institute of Development Studies (IDS). Her research interests lie in state-society relationships around the delivery of public services and accountability.

Wilson Prichard

Wilson Prichard is an Associate Professor at the University of Toronto, a Research Fellow at the Institute of Development Studies, Chair of the Local Government Revenue Initiative (LoGRI) and former Executive Officer of the International Centre for Tax and Development (2020-2024). His research focuses on the relationship between taxation and citizen demands for improved governance in sub-Saharan Africa.

Christopher Heady

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