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Abstract How does tax compliance vary with the size of the tax burden when opportunities for evasion are high? This paper estimates the elasticity of property tax compliance in a field experiment in Kananga, the Democratic Republic of Congo, a setting where the status quo level of compliance is low. In collaboration with the provincial government, we randomly assign four fixed tax rates at the household level as part of a door-to-door city-wide tax collection campaign. Individuals face between 50 and 100% of their true liability. We study how compliance and total government revenues vary with the rate. We also examine the effects of randomized rates on bribe payment and contributions to informal taxes (in-kind labor payments). Our findings will contribute to knowledge about the determinants of tax compliance in weak states as well as the design of optimal liabilities and enforcement in such settings. How does tax compliance vary with the size of the tax burden when opportunities for evasion are high? This paper estimates the elasticity of property tax compliance in a field experiment in Kananga, the Democratic Republic of Congo, a setting where the status quo level of compliance is low. In collaboration with the provincial government, we randomly assign four fixed tax rates at the household level as part of a door-to-door city-wide tax collection campaign. Individuals face between 50 and 100% of their true liability. We study how compliance and total government revenues vary with the rate. We also examine the effects of randomized rates on bribe payment and contributions to informal taxes (in-kind labor payments). Our findings will contribute to knowledge about the determinants of tax compliance in weak states as well as the design of optimal liabilities and enforcement in such settings.
Last Published January 28, 2019 02:47 AM January 28, 2019 08:52 AM
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