Increasing fiscal capacity

Citizens demand more services after a property tax collection campaign

A recent article analyzed the effects of a randomized property tax collection campaign in a large Congolese city. The campaign raised tax compliance from 0.1% to 11.6% and improved citizens' attitudes towards the government. The campaign also increased political participation – citizens in taxed neighborhoods were more likely to attend town hall meetings hosted by the government or submit evaluations of its performance. This study suggests that broadening the tax base has a participation dividend, stimulating political engagement among citizens.

Local elites use local information to efficiently target the households most willing and able to pay taxes

Another paper investigated the effect of delegating tax collection to local elites (chiefs) in a Congolese city. Tax collection by chiefs raised property tax compliance by 3.3 percentage points more than tax collection by state agents, increasing revenues by 43%. Chiefs improved tax compliance mainly by using local information to more efficiently target households with high propensities to pay taxes, not by persuading households to pay taxes. State agents were able to achieve similar results by consulting with chiefs before beginning tax collection. This study suggests that local elites are important allies for states seeking to establish rudimentary fiscal capacity.

Do you have a study we should share for a future Facty Friday? Send an email to drg.el@usaid.gov!