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Zambia VAT incentive experiments: version 2

Last registered on March 10, 2023
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Pre-Trial

Trial Information

General Information

Title
Zambia VAT incentive experiments: version 2
RCT ID
AEARCTR-0011009
Initial registration date
February 27, 2023

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
March 10, 2023, 2:56 PM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
Zambia
Region

Primary Investigator

Name
Brian Dillon
Affiliation
Cornell University
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Other Primary Investigator(s)

PI Name
Twivwe Siwale
PI Affiliation
International Growth Centre
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PI Name
John Mulenga
PI Affiliation
Zambia Revenue Authority
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PI Name
Jihye Jang
PI Affiliation
Cornell University
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Additional Trial Information

Status
In development
Start date
2022-10-25
End date
2024-07-31
Keywords
Behavior, Firms & Productivity, Governance
Additional Keywords
tax incentives, relational contracts, VAT
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
This project is on the topic of tax leakage and policy interventions to increase VAT compliance in Zambia. We will test the impact of a probabilistic incentive (similar to a lottery ticket) on the extent to which small retailers in Lusaka request VAT invoices when making purchases from their suppliers. We will examine heterogeneous impacts by some key firm characteristics measured at baseline.
External Link(s)

Registration Citation

Citation
Dillon, Brian et al. 2023. "Zambia VAT incentive experiments: version 2." AEA RCT Registry. March 10. https://doi.org/10.1257/rct.11009-1.0
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Experimental Details

Interventions

Intervention(s)
All study firms are asked to request and retain receipts and invoices when making purchases from their suppliers. At each follow-up visit, treated firms are provided with the opportunity to play a lottery-style game to win a cash prize. The probability of winning cash is increasing in the total value of VAT invoices retained.
Intervention Start Date
2023-02-28
Intervention End Date
2023-07-31

Primary Outcomes

Primary Outcomes (end points)
1. Total value of VAT invoices received when making purchases from suppliers or capital improvements to the business
2. Share of stocking or capital improvement transactions that lead to the receipt of a valid VAT invoice (as a share of all stocking/capital improvement purchases)
3. VAT-related shopping behaviors, including switching to a VAT-registered supplier, reallocating business to an existing VAT-registered supplier, and inquiring after the VAT registration status of an existing or potential supplier
4. The share of stocking/capital purchases from regular suppliers, where regular suppliers are those from whom the firm has made at least two recent purchases, and from which it plans to purchase again
5. The strength of relational contracts with suppliers
Primary Outcomes (explanation)
We measure the strength of relational contracts with suppliers using an index based on whether the firms' regular suppliers (1) provide goods on credit, (2) offer price discounts, (3) give favorable delivery terms, (4) provide extra products as a gift for regular business, and (5) provide other goods or services not formalized in a contract. We also investigate these outcomes separately.

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
We randomize 1083 small retail firms in Lusaka, which we enrolled in a baseline survey, into three treatment arms:

Control (407 firms)
Low treatment (338 firms)
High treatment (338 firms)

Treated firms receive either a low or a high financial incentive to request and retain VAT invoices from their suppliers. Treatment assignment is at the individual firm level, stratified on key characteristics that we identified at baseline.
Experimental Design Details
Not available
Randomization Method
Stata.
Randomization Unit
Individual firm.
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
Treatment assignment is not clustered.
Sample size: planned number of observations
1083 firms, for a minimum of 4 follow-up surveys (after the baseline survey, and a brief survey conducted during intervention delivery).
Sample size (or number of clusters) by treatment arms
Not a clustered RCT.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Cornell University
IRB Approval Date
2021-10-11
IRB Approval Number
2108010528
Analysis Plan