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Wednesday  03 June 2020  12:30 - 13:45

Local Elites as Tax Inspectors: Experimental Evidence from the DRC

John Weigel (LSE)

IFS, 7 Ridgmount Street, London, WC1E 7AE

IFS-STICERD Public Economics Seminar

Historical states with low capacity often empowered local elites to collect taxes, despite the risk of mismanagement. Could this strategy raise revenues without undermining government legitimacy in fragile states today? We provide evidence from a field experiment in which the Provincial Government of Kasaï Central, in the DR Congo, randomly assigned city neighbor- hoods — spanning 48,000 households — to property tax collection conducted by agents of the tax ministry or by local city chiefs. Chief tax collection generated 53% higher compliance and 38% higher revenues. Although chiefs collected slightly more bribes, they were more honest in assessing and exempting properties, and they caused citizens to have more trust in the formal state. Examining a hybrid treatment arm in which tax ministry agents consulted with chiefs, as well as other survey evidence, we find that chiefs achieved higher compliance because they could use local information to tar- get households with high payment propensity, not because they could better persuade households conditional on having visited them.