Tax administration’s proximity approach improves compliance in wealthier African areas, reduces it in poorer ones
A recent study conducted in Tanzania and other sub-Saharan African countries reveals that the presence of tax agents affects taxpayers' trust and compliance differently depending on the economic status of the region. In wealthier, economically integrated areas, tax agents' visits strengthen trust and boost tax payments. Conversely, in poorer, marginalized regions, the same presence diminishes trust and lowers tax compliance. This finding challenges the assumption that non-intrusive proximity alone can foster better tax relations across all contexts.
Brève Publié le (Africa/Lagos, UTC+1)
A new study conducted by the International Centre for Taxation and Development in Tanzania highlights the complex effects of tax agents’ presence on small businesses in sub-Saharan Africa.
Traditionally, tax administrations relied on controls and sanctions, but many have shifted towards more flexible approaches such as taxpayer education and door-to-door visits to build trust and ease compliance.
The study randomly increased tax agents’ presence in selected neighborhoods and measured impacts on trust and tax payments, combining survey data with administrative tax records.
Results show that in wealthier and economically integrated regions, tax agents’ visits enhance trust in the state and lead to higher tax compliance.
However, in poorer and more marginalized areas, the same presence reduces trust and results in decreased tax payments.
This suggests that proximity alone is insufficient to build trust universally; the broader context of public service presence and state-citizen relations shapes how tax agents are perceived and how taxpayers behave.