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 2020
Gender and Tax Compliance: Firm Level Evidence from Ethiopia
by Seid Yimam & Fissha Asmare

Developing countries often lack tax information and enforcement capacity necessary to effectively implement instruments of a modern tax system, such as VAT, income taxes and others. An alternative strategy to increase tax compliance, and thus revenue, in these countries may depend on the capacity of policymakers to harness individual’s civicmindedness, social norms, reciprocity and cultural…

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October 2020
How to Best Nudge Taxpayers? The Impact of a Tailored Letter Experiment in Eswatini
by Fabrizio Santoro, Edward Groening, Winnie Mdluli & Mbongeni Shongwe

Very little is known about why taxpayers in sub-Saharan Africa (SSA) remit their taxes. In collaboration with the Eswatini Revenue Authority (SRA), this study implements a nationwide randomised controlled trial nudging more than 20,000 income tax payers with behaviourally-informed mailings. This study attempts to shed new light on the drivers of SSA taxpayers’ compliance, and…

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September 2020
What is Wrong with African Tax Administration?
by Mick Moore

National tax administrations in sub-Saharan Africa have undergone considerable reform in recent decades. In a number of respects, they are, on average, more reformed and more efficient than tax administrations in other low income regions of the world. They have responded effectively to a number of major challenges. However, we now have evidence from benchmarking…

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Simulating the Impact of Covid-19 on Formal Firms in Eswatini
by Adrienne Lees, Giulia Mascagni & Fabrizio Santoro

Prior to Covid-19, Eswatini faced numerous developmental challenges with stagnating poverty and economic growth. Lockdown measures were introduced from 17 March, including schools closures, limitations on public and private gatherings, the suspension of non-essential travel within cities, and border closures. Economic activity has been damaged further by South Africa’s strict containment measures and the closure…

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Simulating the Impact of Covid-19 on Formal Firms in Rwanda
by Adrienne Lees, Giulia Mascagni & Fabrizio Santoro

Prior to Covid-19, Rwanda was booming, with economic growth exceeding ten percent in 2019. Strong growth has been accompanied by significant improvements across various human development indicators, such as poverty reduction and rising life expectancy. The pandemic has placed much of this progress in jeopardy. Exports and tourism have been hurt by border closures and…

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August 2020
To File or Not To File? Another Dimension of Non-Compliance: The Eswatini Taxpayer Survey
by Fabrizio Santoro, Edward Groening, Winnie Mdluli & Mbongeni Shongwe

Non-filing refers to taxpayers who fail to submit a tax declaration, thus becoming ghosts in the eyes of tax authorities. It is a widespread phenomenon in sub-Saharan Africa, and has a number of detrimental fiscal effects. Non-filing has been largely unexplored in the literature, which focusses more on active filers. The overall aim of this…

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August 2020
Building a Social Contract? Understanding Tax Morale in Nigeria
by Neil McCulloch, Tom Moerenhout & Joonseok Yang

An important part of every country’s development process is the building of a social contract in which citizens pay tax and, in turn, receive public goods and services. Evidence suggests that this is associated with the establishment of a norm of tax payment and a belief that non-payment is wrong. We exploit a new, nationally…

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Tax Compliance of Wealthy Individuals in Rwanda
by Jalia Kangave, Kieran Byrne & John Karangwa

Increasing emphasis is being placed on the need for low income countries to collect more tax revenue. In parallel, the need for equitable tax systems is also gaining prominence. While African countries have made remarkable progress in increasing tax collections, taxation in many African countries is inequitable in various respects. For example, many revenue authorities…

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Who can make Ugandan Taxpayers more Compliant?
by Ronald Waiswa, Doris Akol & Milly Nalukwago Isingoma

The rate of occurrence of tax evasion is higher in Uganda than in the rest of East Africa. Where the taxpayer has latitude to decide whether or not to be compliant, as in the case of income taxes, Ugandans seem to be less compliant than other East Africans. Uganda collects less in domestic taxes than…

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July 2020
Tax Compliance of Wealthy Individuals in Rwanda
by Jalia Kangave, Kieran Byrne & John Karangwa

Low-income countries are increasing their fiscal independence through the improvement of domestic taxation systems. To continue to do so, they must ensure that these systems are perceived as equitable and preserve their integrity. An essential characteristic of an equitable tax system is the treatment of wealthy individuals. In this paper, we use key informant interviews…

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Blogs:

September 2020
by Giulia Mascagni

Despite being recognised as a critical aspect of tax compliance, taxpayer knowledge is a very under-explored topic. Using evidence from Rwanda and Eswatini, Giulia Mascagni explores why taxpayer education matters, whether it is effective, and how research can inform governments’ taxpayer education programmes. Across Africa, many taxpayers have a shockingly poor understanding of the tax…

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September 2020
by Anna Custers, Benjamin Holzman, Raul Felix Junquera-Varela & Roel Dom

Amid the Covid-19 pandemic, changes that might ordinarily take a few years are now occurring in the span of just a few months. The uptake of e-commerce and the adoption of video-conferencing, for example, have increased rapidly. This distinctive feature of crises—that they can accelerate otherwise slow-moving trends—can be harnessed by those seeking to create…

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July 2020
by Killian Clifford

Mobile money taxation is, for some, a controversial topic. One the one hand, it is critical for developing countries to increase domestic revenue in order to finance public goods and services and achieve the Sustainable Development Goals. One the other, mobile money is seen as something of a development success story, providing access to financial…

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Research Projects:

Current Project
How reliable are Taxpayers’ Tax Returns Data? Data Management in Uganda Revenue Authority
Project Researchers: Jova Mayega, URA, Jane Nabuyondo, URA, Milly Nalukwago, URA & Ronald Waiswa, URA

The overall objective of this project is to examine how clean the tax return data is in the Uganda Revenue Authority (URA). The team will examine the following research questions: What data gaps exist in URA tax return records? What are the sources of errors (if any) in the return filing process? What challenges do…

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Past Project
ICTD-RRA National Taxpayer Survey
Project Researchers: Giulia Mascagni & Fabrizio Santoro

In 2019 the Rwanda Revenue Authority (RRA) commissioned a National Taxpayer Survey and related study on tax compliance to the International Centre for Tax and Development (ICTD). This study is meant to serve as background to the new RRA Tax Compliance Strategy, which is scheduled to be launched in July 2020. Data was collected in…

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Current Project
The link between tax revenue allocation and tax morale in Nigeria
Project Researchers: Tom Moerenhout, IISD, Belinda Archibong & Evans Osabuohien

The proposed research will answer three research questions: (1) Do regions that have historically received more tax revenue have better tax morale? (2) What type of tax allocation in the form of public service provision increases tax morale? (3) Can oil producing regions turn the use of revenue from the 13% fund into higher tax…

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Current Project
The Role of Information About Peer Behaviour on Tax Compliance in Nigeria: An Experimental Study
Project Researchers: Adedeji Adeniran, Joseph Ishaku, Precious Akanonu & Chukwuka Onyekwena

Domestic revenue mobilization is a priority for many SSA countries. Yet, low tax compliance constitutes a major challenge to this drive. Improving tax compliance will require an understanding of the underlying factors influencing a taxpayer’s decision to either pay taxes or not. However, little is known about tax compliance behaviour in most SSA countries; insights…

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Past 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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Past 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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Past 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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Past 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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