Scaling Fiscal Capacity: Evidence from Senegal’s Capital City

About this event

Increasing fiscal capacity remains a central challenge for low-income countries, and it is difficult when resources for registration and enforcement are limited. Governments may also face resistance when increasing tax pressure in environments with low public provision. We partner with the government of Senegal to study their first large-scale property tax program in the capital city, Dakar. Through a randomized controlled trial, 193 neighborhoods (80,000 properties) spanning the capital city were assigned either to a treatment group, where a digitized property tax census was conducted, or a control group. The program was successful in massively expanding the tax net : there was a six-fold increase in the share of property owners receiving a tax bill, and the compliance rate increased from 9 to 24.5%, leading to substantial revenue gains. We study the mechanisms of tax (non)compliance of property owners as well as the distributional effects of this tax base expansion. Furthermore, we examine how the program changes attitudes towards taxation, perceptions of the government and political engagement. Our findings offer new insights on the design and effects of large-scale state capacity-building programs.