Tax Compliance and Accountable Governance: Experimental Evidence from Firms in Uganda

A fiscal social contract in which citizens pay taxes and the government is accountable to taxpayer demands in the way funds are spent is a fundamental characteristic of many democratic states. However, many LMICs exhibit low tax compliance and dissatisfaction with public services. In these settings, tax policies commonly aim to increase enforcement capacity. The researchers contend that a deterrence-based approach alone has failed to bring about sustainable changes in the tax climate and propose an alternative approach based on increasing political participation. The researchers collaborate with the Kampala Capital City Authority in Uganda and propose to test two interventions: (i) in-person town halls with representatives from the local authorities and (ii) an ICT-based civic participation platform. Leveraging original survey data and cross-linked business tax registries at the national and municipal level, the researchers provide novel evidence on fiscal contracts in low-income countries and the way firms engage with the state.