Raising taxes while limiting the burden on the poor in low-income countries

Raising public revenue is crucial for state capacity. Governments in low-income countries often have a particularly large need for financial resources that would allow them to provide effective education, healthcare, or transportation infrastructure, which in turn could spur greater economic prosperity. However, these governments face a difficult trade-off between collecting more tax revenue and exacerbating poverty because poorly targeted taxes may themselves hinder economic development. This project will collaborate with tax authorities in Tanzania and the Democratic Republic of Congo to explore ways to increase tax capacity while minimizing the burden on the poor. It will implement multiple randomized control trials in both countries that seek to improve the targeting and timing of taxation to avoid undue burdens on poor households and small firms. Key research questions include: How can the optimal timing of tax payments, considering taxpayers’ time-varying liquidity constraints, be identified? How does the optimization of the timing of tax inspector visits affect individuals’ socio-economic well-being and efficiency of tax collection? How can the government obtain information that can be used to target taxpayers more efficiently and what consequences does the adjusted targeting have on individuals across the income distribution?

Prof. Dina Pomeranz
Project Leader
Department of Economics

DRC: The study leverages a combination of administrative tax data and household surveys. The administrative tax data includes information about property values, liabilities, accessibility and exemption status, and property tax payments for all 135,915 buildings across 460 neighborhoods of Kananga. We also observe tax campaign program data, including whether taxpayers received visits from collectors. In addition, we administer three household surveys. The data is not publicly available. Tanzania: Baseline and endline survey data. Possibly administrative tax data if data request at the Tanzanian Revenue Authority succeeds.

For further information about the project and data availability please contact: deborah.kistler@uzh.ch