Tax Administration and Compliance

Image credit: © Uganda Revenue Authority, Vanessa van den Boogaard

Many of the challenges low-income countries face in mobilising domestic resources are related to tax administration as much as tax policy. Our research on this theme encompasses all aspects of tax administration, from technology adoption, to data management and strategies for collecting revenue from different types of taxpayers. Tax compliance is a key focus, as low-income countries struggle with widespread evasion, corruption, and limited administrative capacity. Our research on compliance includes survey-based studies of taxpayers’ perceptions and attitudes, case studies, and large-scale field experiments.

Publications:

October 2019
Tax Evasion and Missing Imports: Evidence from Transaction-Level Data
by Andualem T. Mengistu, Kiflu G. Molla & Giulia Mascagni

Tax evasion is typically very hard, if not impossible, to measure. In the case of trade flows however, it is possible to capture it thanks to “missing imports”: the difference between the total value of exports recorded by country A to country B and the total value of imports of country B from country A….

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Innovations in Tax Compliance: Conceptual Framework
by Wilson Prichard, Anna Custers, Roel Dom, Stephen Davenport & Michael Roscitt

This paper presents a conceptual framework for developing more effective approaches to tax reform and compliance. The framework proposes that by combining complementary investments in enforcement, facilitation, and trust, reformers can not only strengthen enforced compliance but can also (a) encourage quasi-voluntary compliance, (b) generate sustainable political support for reform, and (c) create conditions that…

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September 2019
Tax Evasion and Missing Imports: Evidence From Transaction-Level Data
by Andualem T. Mengistu, Kiflu G. Molla & Giulia Mascagni

It is well documented in the literature that developing countries raise less tax revenue as a share of their economy than their developed counterparts. Part of this gap can be explained by the relatively higher tax evasion in the former. Recent literature shows that increasing the availability of information reduces evasion, by increasing the probability…

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Small Business Owners and Corporate Tax Responsibility in Nigeria: An Exploratory Study
by Kenneth Amaeshi, Bongo Adi & Godson Ikiebey

This study explores how small business owners talk about their tax responsibility, especially in non-enabling institutional contexts. It identifies two main types of tax responsibility discourses amongst these business owners: (1) duty-based and (2) rights-based. The duty-based talks see taxation primarily as the citizens’ responsibility to governments, which should always be fulfilled unconditionally, while rights-based…

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Assessing the Performance of African Tax Administrations: A Malawian Puzzle
by Waziona Ligomeka

We lack good indicators of the quality of national tax administrations, especially for low-income countries. The situation is, however, improving. Through the relatively new TADAT process (Tax Administration Diagnostic Assessment Tool), an increasing number of national tax administrations are receiving scores from teams of peer reviewers on how well they perform in nine key functions….

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Perceptions of VAT Compliance in Ethiopia
by Worku Tamrie Atnafu, Gebregziabhere Gebretsadik Kalayou & Assefa Gezae Huluf with Colin Anderson

Tax is a major source of government revenue. Many countries prioritise mobilising domestic resources to finance government spending. However, many factors influence the revenue generated by taxation, including the population’s level of compliance with tax expectations. A country’s ability to raise funds from tax depends on the level of tax compliance. Tax compliance refers to…

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How Clean is our Taxpayer Register? Data Management in the Uganda Revenue Authority
by Jova Mayega, Robert Ssuuna, Muhammad Mubajje, Milly I. Nalukwago & Lawrence Muwonge

Revenue administrations collect large amounts of data on individuals and firms in the course of their work. Increasingly, this data is digitised. The use of digital technologies has the potential to greatly improve the efficiency and effectiveness of tax administration, by: Reducing the cost of routine operations for both taxpayer and tax collector; Reducing the…

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Nil-Filing in Eswatini: Should the Revenue Authority be Bothered?
by Fabrizio Santoro & Winnie Mdluli

For many reasons, the tax to GDP ratio in developing countries is still remarkably low. One of the key factors behind poor tax collection refers to low tax compliance. In this paper, we look at compliance with income tax in Eswatini. Eswatini shares the same tax performance of other sub-Saharan African countries: the tax to…

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Turnover-Based Presumptive Taxation and Taxpayers’ Perceptions in Ethiopia
by Abis Getachew

Why turnover-based presumptive taxation? The Ethiopian economy is cash-based and dominated by a large number of micro and small businesses. Hence, taxing this sector assists in raising government revenue and increasing the number of taxpaying firms. Turnover-based presumptive taxation provides a regime that simplifies the tax rules for small taxpayers and helps introduce them to…

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Perceptions of Value Added Tax Filing and Invoicing Compliance in Ethiopia: The Case of Three Federal Branch Offices in Addis Ababa
by Worku Tamrie Atnafu, Gebregziabhere Gebretsadik Kalayou & Assefa Gezae Huluf with Colin Anderson

African governments are increasingly seeking to improve tax compliance in the pursuit of domestic revenue sources. Despite this trend, there is limited understanding of value added tax (VAT) compliance in Africa. In Ethiopia, increased VAT compliance is essential for the government to meet its ambitious domestic revenue goals. Therefore, we surveyed 652 Ethiopian VAT-registered businesses…

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Blogs:

November 2019
by Wilson Prichard

At the request of the ICTD, Professor Richard Bird generously agreed to review the new World Bank publication Innovations in Tax Compliance, which proposes a new framework to help guide the design of tax reform efforts. Richard was the founding Chair of the Advisory Group of the ICTD, and is a long term advisor to…

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November 2019
by Richard Bird

See here for a response to Professor Bird’s critique by the World Bank framework’s lead author and ICTD Research Director Wilson Prichard. Innovations in Tax Compliance, a recent World Bank working paper, undertakes two tasks. First, it reviews the rapidly growing theoretical and especially empirical literature on how countries can improve tax compliance and, not…

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November 2019
by Marijn Verhoeven & Wilson Prichard

The government of Kaduna State, Nigeria, has been working to increase tax collection by broadening the tax base, investing in technology and modernisation, and implementing large-scale policy and administrative reform. These efforts have substantially improved the business environment and increased revenue collection. Yet, there is still significant room to boost voluntary tax compliance. At the…

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Research Projects:

Current Project
Does Gender Matter in Tax Compliance? The Case of URA’s Individual Taxpayers
Project Researchers: Ronald Waiswa, Uganda Revenue Authority, Nathan Sebaggala & Jalia Kangave, ICTD

There is now an extensive body of literature looking into the factors that influence tax compliance. These studies, loosely known as tax morale studies, employ various tools to understand why some people pay taxes while others do not. In some cases, the studies are gender disaggregated, thereby enabling us to understand how men and women…

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Current Project
Improving State Taxation Capacity using Administrative Data
Project Researchers: Aprajit Mahajan, JPAL-South Asia, Shekhar Mittal & Ofir Reich

Improving the state’s ability to tax effectively is central to the development process. However, tax collections (as a percentage of GDP) are low in most developing countries — in India the ratio is about 15% — and non-compliance is widely seen as an important problem. A common strategy to evade taxes is to establish shell…

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Current Project
The Myth of Gender Tax Compliance in Ethiopian Enterprises
Project Researchers: Seid Yimam Mohamed & Fissha Asmare Marye

This study will examine tax compliance differential between female-owned and male-owned business enterprises in Ethiopia, particularly located in Addis Ababa. Collecting survey data on 400 medium and large size firms, we will estimate the log-odds-ratios from a fixed effect logit model to describe the probability of being tax compliant and apply a generalized Oaxaca–Blinder decomposition…

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Current Project
Rethinking Tax Morale
Project Researchers: Wilson Prichard, University of Toronto

The past decade has witnessed a surge in international interest in the importance of ‘tax morale’ as a key component of strategies for strengthening tax compliance in developing countries. This focus has been long overdue, and there is now broad research evidence that strengthening tax morale can have important benefits in encouraging ‘quasi-voluntary’ tax compliance….

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Current Project
What shapes tax morale in Ethiopia?
Project Researchers: Gebrelibanos Hadush Amare, Raya University, Nega Afera Reda & Gebremeskel Hailu Tesfay

Citizens’ tax morale can enhance actual compliance behavior and provide governments with the necessary revenue. This study aims to identify the various factors that shape citizens’ attitudes towards taxation and suggest ways to improve compliance through positive motivations. The 2013 5th round Afrobarometer survey conducted in Ethiopia is our main source of data. A sub…

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Current Project
Enhancing Tax Compliance Using GIS: A case study in Uganda
Project Researchers: Stephanie Sweet, Johns Hopkins SAIS & Simon Muyunga

Geographic information systems (GIS) are underused as a tool for analysis of tax evasion and addressing compliance problems. This research aims to show how geospatial data can be harnessed to identify and estimate noncompliance of unregistered taxpayers and under reported income by combining geospatial information and taxpayer data to indirectly measure taxable income. The information…

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Current Project
Using third-party data to improve tax compliance in a context of low enforcement
Project Researchers: Léo Czajka, UCLouvain, Mattea Stein & Bassirou Sarr

Developing countries typically face with low tax compliance both at the extensive and intensive margins. In the presence of weak enforcement capacity by state institutions, leveraging information diffusion through firm networks may be a cost-effective way of improving tax compliance. Senegal is confronted with two major challenges in terms of tax compliance. Firstly, the tax…

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Current Project
Capacity building program with Uganda and Rwanda revenue authorities
Project Researchers: Jalia Kangave

On February 8th, the International Centre for Tax and Development (ICTD) announced a new capacity-building program with the Ugandan and Rwandan Revenue Authorities. This project will be a year-long pilot of workshops and collaborative research between researchers from the ICTD and staff from the revenue authorities in Rwanda and Uganda. The course is mostly about…

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Current Project
Tax compliance in Eswatini – a nudging experiment
Project Researchers: Fabrizio Santoro

Tax to GDP ratio in developing countries is still remarkably low. One of the key factors behind poor tax collection is low tax compliance. This study aims to test, using a randomized controlled trial, the effect of a multi-faceted nudging strategy from the Eswatini Revenue Authority (SRA), targeting the whole population of income taxpayers in…

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Past Project
Direct and Network Effects of Tax Enforcement: Experimental Evidence from the D.R. Congo
Project Researchers: Dr. Augustin Bergeron, Harvard University

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…

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