The Origins of Tax Compliance and State Capacity

Last registered on March 14, 2018

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Pre-Trial

Trial Information

General Information

Title

The Origins of Tax Compliance and State Capacity

RCT ID

AEARCTR-0002229

Initial registration date

July 31, 2017

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

August 01, 2017, 4:04 PM EDT

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

Last updated

March 14, 2018, 10:05 PM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country

Congo (Democratic Republic of the)

Region

Kananga (Kasai Central)

Primary Investigator

Name

Pablo Balan

Affiliation

Harvard University

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Other Primary Investigator(s)

PI Name

Jonathan Weigel

PI Affiliation

Harvard University

Contact Investigator

PI Name

Gabriel Tourek

PI Affiliation

Harvard University

Contact Investigator

PI Name

Augustin Bergeron

PI Affiliation

Harvard University

Contact Investigator

Additional Trial Information

Status

In development

Start date

2017-07-19

End date

2018-12-01

Keywords

Governance

Additional Keywords

Taxation, Property Rights, State Capacity

JEL code(s)

H2, H3

Secondary IDs

Abstract

What are the barriers to raising revenues in developing countries? With the goal of reducing reliance on foreign aid and natural resources, many governments seek to build tax bases among citizens who operate predominantly within the informal sector. Recent research has documented the difficulty of encouraging citizens in these contexts to enter the formal sector and regularly pay taxes. This study explores three understudied determinants of low tax compliance. First, low-capacity states are typically weak at protecting property rights. Second, inefficient methods of tax collection may constrain the effectiveness of enforcement. Third, when citizens face high liquidity constrains, compliance may be elastic to the tax burden. We will assess the effect of these factors on tax compliance with a randomized field experiment that implements interventions affecting each of these margins through a collaboration with the Provincial Government of Kasaï Central in Kananga, Democratic Republic of the Congo, from August 2017 to December 2018. We will vary (1) subsidized access to formal land titles, (2) the method of tax collection---comparing centralized and local collection---and (3) the property tax rates faced by households. This Pre-Analysis Plan presents the research design and introduces the hypotheses pertaining to the land titling intervention. It will be updated after a pilot of the tax intervention in early 2018 to include hypotheses pertaining to taxation before endline data collection.

External Link(s)

Registration Citation

Citation

Balan, Pablo et al. 2018. "The Origins of Tax Compliance and State Capacity." AEA RCT Registry. March 14. https://doi.org/10.1257/rct.2229-3.0

Former Citation

Balan, Pablo et al. 2018. "The Origins of Tax Compliance and State Capacity." AEA RCT Registry. March 14. https://www.socialscienceregistry.org/trials/2229/history/26676

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Experimental Details

Interventions

Intervention(s)

We propose three interventions to improve formal participation and tax compliance: (1) providing citizens subsidized access to formal property titles; (2) collecting property taxes through local bureaucrats compared to centralized collectors deployed by the provincial ministry; and (3) offering property tax discounts of varying levels to households. The first intervention studies how citizens value formal property titling and whether this impacts tax compliance. The second intervention evaluates whether tax collection is more cost-effective when conducted by actors with local knowledge, compared to centralized collection, which may be more costly but easier to monitor. The third intervention will elicit some of the first estimates the elasticity of tax compliance with respect to the tax rate, a measure of how many citizens comply with tax payment depending on the amount of liability.

Intervention (Hidden)

Intervention Start Date

2017-08-10

Intervention End Date

2018-11-01

Primary Outcomes

Primary Outcomes (end points)

The main outcome is tax compliance, i.e., whether an individual has payed the property tax. Other outcomes include 1) rental tax payment, 2) bribe payment to tax collectors, 3) people's view on the local government, 4) views on traditional authorities, 5) civic engagement, 6) access to public goods, 7) investment in land plots, 8) level of confidence in security of property rights, 9) formalization, and 10) social networks.

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

The unit of randomization for these taxation treatments is the polygon. There are 361 polygons in the map of Kananga, which will be randomly assigned to the direct tax collection arm, in which tax ministry collectors will be charged with property tax collection; the indirect tax collection arm, in which local avenue chiefs will be charged with this task; or the control arm, in which citizens are expected to visit a local bank to pay the taxes due on their property. In contrast to these three treatment arms, which vary on the polygon level, the subsidized access to formal land titling and tax rate coupons will be cross-randomized at the household level. We will first administer a baseline survey at selected households, and households will be randomly selected to a land titling intervention group within each polygon. Individual households selected to receive the land titling intervention will receive on-site appraisals and encouragements to obtain formal titles. Treatment assignment for the discounted tax rate intervention will occur during baseline survey visits — randomly selected households will receive tax coupons based on algorithm implemented within the surveying software on tablets used by enumerators. To access the tax rate discounts, selected individuals will need to present their coupon to avoid paying the full rate. Coupons will be individualized using the name and identification code written on the property owner’s state identity card. Failure to present the coupon and/or the accompanying identity card disqualifies households from the discount.

Experimental Design Details

Randomization Method

Randomization will be done by a computer.

Randomization Unit

The city of Kananga has been divided in 361 polygons. randomized. Polygons were defined for a recent tax collection campaign
studied by one of the researchers using a satellite map of Kananga and dividing the urban areas into 361 polygons of similar size along naturally occurring boundaries, such as avenues and ravines. Randomization of the taxation arms will be implemented at the polygon level. Randomization of the property titling intervention will be implemented at the individual level within polygons.

Was the treatment clustered?

Yes

Experiment Characteristics

Sample size: planned number of clusters

361 polygons.

Sample size: planned number of observations

4,332 households within 361 polygons in the city of Kananga.

Sample size (or number of clusters) by treatment arms

The study comprises 361 polygons. The central taxation arm comprises 181 polygons. The local taxation arm comprises 180 polygons.
Within these categories of polygons, 12 people will be sampled per polygon, so the total sample size will be 4,332.

See page section 2.1 of the PAP for further information.

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Supporting Documents and Materials

IRB