Research

Are firms sophisticated maximizers, or do they consistently make errors? Using transaction-level data from Ugandan value-added tax returns, we show that sellers and buyers report different amounts 79 percent of the time, despite invoices being easily cross-checked. We estimate that 27 percent of firms are disadvantageous misreporters—they misreport own sales and purchases such that their tax liability increases—while 73 percent are advantageous misreporters. Many firms—especially disadvantageous misreporters—fail to (or under- ) report transactions they themselves reported at customs, increasing their VAT liability. Unilateral VAT misreporting cost Uganda about USD 383 million in foregone 2013-2016 tax revenue.

[Ungated Paper] [Appendix] 

The implementation of government programs requires a list or register of individuals who are eligible for the program. Building these registers accurately is a challenge in contexts with low administrative capacity, and is often the responsibility of bureaucrats. We study the impacts of giving such bureaucrats more (or less) discretion in building these registers in the context of the creation of the first digitized property tax register in Senegal. We randomly assign neighborhoods to valuation methods with different degrees of bureaucrat discretion and compare the registered property values against a benchmark of market values provided by licensed real estate assessors. Bureaucrats in full discretion areas undervalue properties, and more so for higher-value properties, resulting in a regressive tax profile. The median tax rate is 3.8% in the lowest quintile and 1.7% in the top quintile, instead of the expected 4.4% and 8.6% rates based on the tax code. In contrast, a rule-based system where bureaucrats record property characteristics (not values) that an algorithm then uses to compute values, significantly reduces this tax gap. A pure rule with no bureaucrat inputs yields the highest accuracy and equity. We show this is due to bureaucrats' lack of knowledge about high-end properties and their fairness concerns, and not due to collusion between bureaucrats and property owners.

[Paper]    [Funding: EDI-CEGA, FID, J-PAL DigiFI]

Can knowledge of buyer-seller networks be leveraged to improve tax compliance? We explore this question through a randomized controlled trial in Uganda. Using transaction-level VAT data, we construct firm networks and identify discrepancies in amounts reported by trading partners. Enforcement letters highlighting these discrepancies are sent to either the seller, the buyer, or both. The correction rate in the treatment group is 23.8%, fourteen times higher than the 1.6% in the control group. This response is asymmetric: corrections are primarily made by sellers, even when only buyers receive letters, providing evidence that some firms induce a change in their partners’ tax reporting behavior. Spillover effects extend to transactions not listed in the letters, including those involving other trading partners. The intervention also results in sustained improvements in reporting behavior over subsequent months.

[Paper]   [Previous version: CEPR Discussion paper]

 This paper sheds light on the fiscal trajectories of 18 former French colonies in Africa from colonial times to the present. Building upon own previous work about colonial public finance (Cogneau et al., 2021), we compile a novel dataset by combining previously available data with recently digitized data from historical archives, to produce continuous and comparable public revenue data series from 1900 to 2018. This allows us to study the evolution of the level and composition of fiscal revenues in the post-colonial decades, with a special focus on the critical juncture of independence. We find that very few countries achieved significant progress in fiscal capacity between the end of the colonial period and today, if we set aside income drawn from mineral resources. This is not explained by a lasting collapse of fiscal capacity at the time of independence. From 1960 to today, the reliance on mineral resource revenues increased on average and dependence on international commodity prices persisted, with few exceptions. The relative contribution of trade taxes declined after the structural adjustments, and lost trade revenues were not compensated by a sufficient increase in domestic taxes. However, for the most recent period, we do note an improvement in the capacity to collect taxes on the domestic economy.

[PSE Working Paper]

Motivated by the fact that the taxation of natural resources is both crucial and particularly challenging for developing countries, this paper draws on a unique dataset to produce empirical evidence on two issues pertaining to the fiscal impact of oil. On a sample of 31 countries during the 2000s oil price boom, we first assess which country and sector characteristics are correlated with the effective tax on oil, i.e. the share of oil income collected by the government. Secondly, we test whether oil revenue evicts traditional tax revenues. We propose a new methodology to address this question and we conclude to the absence of such an eviction effect: we observe no effect of oil revenue on non-oil taxes through taxation channels, and linkages with the non-oil economy seem to yield additional non-oil tax revenues. These econometric analyses are complemented by six comparative case studies of countries observed before and after oil production begins. Historical, institutional and oil sector-specific information allows to account for differences observed in the evolution of the effective tax on oil and of non-oil taxes.

[UNU-WIDER Working Paper]