Becoming Legible to the State : The Role of Detection and Enforcement Capacity in Tax Compliance
Tax revenue in many low-income countries is inadequate for funding government investment in infrastructure and public services. This paper examines two dimensions of low state capacity that hinder tax collection: the inability to ascertain the tax...
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/undefined/589171637156811373/Becoming-Legible-to-the-State-The-Role-of-Detection-and-Enforcement-Capacity-in-Tax-Compliance http://hdl.handle.net/10986/36605 |
| Summary: | Tax revenue in many low-income
countries is inadequate for funding government investment in
infrastructure and public services. This paper examines two
dimensions of low state capacity that hinder tax collection:
the inability to ascertain the tax base (detection capacity)
and the inability to enforce unpaid liabilities (enforcement
capacity). A randomized experiment with Liberian property
owners finds that using identifying information from a newly
developed property database to alert property owners that
their noncompliance has been detected quadruples the tax
payment rate, but only when the notice includes details on
the penalties for noncompliance. A second experiment finds a
further increase in compliance from signaling greater
enforcement probability to delinquent property owners. These
results highlight the importance of investments in both
detection and enforcement capacity. |
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