No shame in my name: Public disclosure and tax compliance in a low-capacity state

• In Event: Property Taxation in Developing Countries

Abstract

Public disclosure of tax behavior is a potentially promising policy tool for raising
tax compliance in low-capacity states. Through two cross-randomized experiments
involving 70,000 taxpayers in Kampala, Uganda, we study effects of reporting delinquents and recognizing compliers. In doing so, we provide evidence on the social
dimensions of tax morale. The threat of publicly disclosing delinquency raises
compliance by 17%, but subsequently disseminating delinquent behavior lowers
compliance of others by 21%. Public recognition backfires, lowering compliance
both for those promised recognition (16%) and for those who receive information
about compliant taxpayers (19%). Symmetric reporting and recognition results are
consistent with a model in which being publicly known as a rental property owner
is costly, but social sanctions for delinquency are limited. This is corroborated
by interviews with tax-liable property owners. Further, disseminating information
causes beliefs to be updated down toward the true compliance rate, suggesting a
likely channel through which information dissemination lowers compliance. Overall, these policies are limited at raising revenue in a low-capacity context.

Author

• Tanner Regan, George Washington University