Willingness-to-Pay to avoid tax exposure among small firms in Tanzania

We will conduct an incentivized willingness-to-pay (WTP) elicitation to evaluate firms' WTP to list their phone in a public, mobile-phone based directory listing service. Our research design will include randomly assigning firms either to tax or standard priming. The standard priming will invite firms to provide their contact information to a mobile-based directory that will be available to customers throughout the region. The goal is for firms to understand that it is an opportunity to advertise their firm to new customers and other contacts. The tax priming will replicate the standard priming and add another phrase about how the mobile directory may be used by government officials, including people from the tax collecting agency. The goal is to learn whether being primed to think about taxes lowers firms' willingness-to-pay to list their contact information. We will collect data about competition and mobile money use services from all firms to assess how this factor might significantly affect WTP for directory listing services. In doing so, we intend to show policy-motivated evidence into how firms’ competition interacts with tax priming and mobile money use in influencing WTP for directory listing services.

2023-10-21

2023-12-13

Willingness to pay to list their business phone number in a public directory

Heterogeneity by number of competitors, use of mobile money, knowledge of mobile money fees and taxes, firm infrastructure/assets, firm tenure

Firms with more competitors may have different WTP. Their WTP may be higher if they perceive advertising as beneficial to help distinguish them from competitors. But, the effect may also go in the other direction - firms in competitive sectors often work in settings where many competitors are available on the same street and they face relatively inelastic demand because the sell or provide commodity services. If that is the case, firms with more competitors may have lower WTP. Put the other way, firms with fewer competitors may offer more specialized services that would benefit from advertising to a wider audience.

We hypothesize that the use of mobile money services and knowledge of mobile money fees and taxes could significantly affect firms’ WTP for directory listing depending on tax priming. Firms using the mobile money services in tax primed group might modify their WTP for directory listing depending on their view of how taxes would impact the cost and benefit of directory listing. If firms often use mobile money for transactions, they may be used to mobile transactions with customers and suppliers that would increase their WTP to list their firm.

Finally, we will look at heterogeneity by firm infrastructure/assets and tenure to understand if more established and larger firms have higher WTP with and without tax priming. We hypothesize that more established businesses may be more likely to be registered with the local government - especially if they operate a firm that has a defined storefront, have been operating for more years, or have more business assets.

1. Firms complete a survey
2. At the end of the survey, firms are automatically randomized to groups with tax or standard priming. The enumerator reads the priming directly to the respondent. The enumerator also trains the respondent to understand how the WTP game will work and plays several practice rounds to illustrate how a random draw affects outcomes.
3. The respondent is asked a series of questions that elicits their willingness to pay to have their contact information listed in a phonebook directory. The prices range from $0.10 USD up to $2.00 USD. A respondent indicates their highest willingness to pay and then the questions end. (E.g. if a respondent indicates that they are willing to pay $0.30 but not $0.50, then the price questions automatically stop).
4. The enumerator draws a price from a bag. If the respondent's highest willingness-to-pay is below this price, they pay it and have their phone number listed, otherwise no other action is needed.

Not available

Randomization done within survey software at the time of the interview

Individual firms

No

0

600

600