PIERI-20355 Local authorities and tax collection: Experimental evidence from Tanzania

Abstract

Property tax is one of the potential revenue sources in developing countries, but has shown little contribution to the total tax revenue. The existing evidence indicates that property tax contributes on average less than 1% of GDP in developing countries and below 0.5% of GDP for African countries. The Tanzanian context of property tax is of no difference from other developing countries, where property tax is one of the potential tax base that has limited contribution to the total tax revenue. While we acknowledge that there are many studies using SMS reminders to influence tax compliance; we leverage this strategy to study the additional effect of involvement of local authorities in tax compliance. We employed RCT to examine the effect of messaging strategies and involvement of local leaders to increase property tax payment compliance. Participants were randomly allocated to three treatment arms and a control group using big-stick randomization method which led to a final sample of 668 Mjumbes (local leaders) and 21,328 taxpayers. The first treatment arm involved SMS reminder with a threat of fine, and second arm combined treatment for the first arm with an additional threat of involving local leaders in the tax collection process. The third arm involved the treatment in the first arm with an actual request for help from local leaders to increase tax compliance. Results indicate that, in all treatment arms, the regression coefficients show positive impact and are significant at 1%. Results also show that the coefficient of the third treatment arm (T3) revealed a lower coefficient by TSH 22 in amount paid; and a slightly higher coefficient by 0.17 percent point in payment status for SMS recipients. These results suggest that actual Mjumbe involvement did not trigger any additional effect in compliance relative to the standard reminder SMS alone when outcome measured at amount paid; but had a slight additional effect in compliance relative to the standard reminder SMS alone when outcome is measured as payment status.


Members

Project leader: Mwanahamisi Kawega

Project researchers: Francis Mwaijande | Muhajir Kachwamba | Joshua Mwakalikamo | Muhajir Kachwamba | Diego Shirima | Kija Badaka | Jumanne Sagini | Eva Lyimo | Jasmin Sereri | Salama Ally

Scientific mentors: Guillermo Cruces


Journal publication

No journal publications.


Working Papers

Title Modified Size Comments Recommendations
Local Authorities and Tax Collection: Experimental Evidence from Tanzania 2021-11-15 2.28MB 0 0

Policy Briefs

Title Modified Size Comments Recommendations
Improving property tax compliance in Tanzania 2022-03-01 688.88kB 0 0

Final report

No final reports.


Proposal

Title Modified Size Comments Recommendations
The Effect of Mobile Phone Text Messages Reminder on Property Tax Compliance in Tanzania: An evidence from Randomized Control Trials 2022-06-28 217.79kB 0 0

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