Tax Capacity and State Accountability

How can tax authorities in environments with limited scope for capacity use low-cost methods to improve tax compliance?

In partnership with the Uganda Revenue Authority using Uganda’s monthly Pay-As-You-Earn (PAYE) tax, researchers experimentally assess whether low-cost messages to firm owners improve tax compliance, randomizing mediums and content in messages to small and medium sized firm owners. They examine the extensive vs. intensive margins of compliance by comparing non-filing firms, firms with compliance challenges, and compliant firms. Last, they study how increased compliance differentially affects employers (who pay the tax) and employees (from whom it is withheld) to assess whether the taxation-accountability link persists under withholding. They will also also examine how increased pressure from the state to pay taxes affects citizen perception of the government.