Conference Agenda

Compliance with the Value Added Tax (VAT) is a major challenge for tax administrations in many low- and lower-middle income countries (LLMIC). Some richer countries have introduced receipt lotteries to improve compliance. To address the problem that the self-enforcing property of the VAT typically breaks down at the point of sale to the final consumer, these lotteries provide customers with a monetary incentive to obtain formal receipts for purchases. In collaboration with the Tanzania Revenue Authority, we introduce a receipt lottery in Tanzania. Using administrative tax data, we find that the lottery significantly increases the recorded sales and VAT liability of VAT registered firms but does not affect non-VAT registered firms. Customer survey data reveals that the customers are aware of the lottery and respond by asking for receipts more frequently. Businesses often respond by printing fewer receipts when customers do not explicitly request them, partially mitigating the lottery’s effects.

For low-income countries looking to enhance revenue mobilisation without harming firm growth, understanding the full burden of taxation, beyond just tax liabilities, is crucial. This paper documents the substantial and often regressive tax compliance costs faced by small and medium-sized firms in Uganda. Using original survey data from nearly 2,000 firms, matched to administrative tax data, I show that compliance costs are significant, equivalent to 2% of turnover for the median firm. Moreover, total compliance costs often exceed firms' tax liabilities. Breaking down cost components, I find that labour time spent on tax compliance activities is the largest component, with tax compliance consuming a median of 34 hours of labour time per month, and approximately 20% of firm owners' working hours. Using a survey experiment, I test how sensitive compliance costs measures are to the measurement strategy, finding significant divergence between estimates from an itemised module versus more aggregate questions.

Low-income countries face the combined challenges of climate shocks and limited domestic revenue mobilization, yet these issues are rarely studied together. This paper provides new evidence on the impact of climate shocks on firm performance and tax revenue in a low income country context, using firm-level data from Zambia. We find that extreme weather events, such as excessive rainfall and high temperatures, significantly reduce firms’ sales, input purchases, and tax collection, particularly in sectors such as manufacturing, retail, accommodation, and construction. Firms respond by reducing employment and wages, reflecting a decline in productivity.

Value Added Tax (VAT) collection is essential for achieving domestic revenue objectives. Yet, the extent of misreporting, or the VAT gap, is infrequently and unsystematically evaluated in developing countries, where it would be most beneficial. This study utilizes VAT declaration and audit data to estimate VAT misreporting in Rwanda, applying a machine learning approach to predict evasion in unaudited firms and periods. We measure the underreporting component of the compliance gap, quantifying potential revenue losses due to non-compliance. We estimate a 62 per cent VAT gap among all VAT-reporting enterprises in Rwanda. The Manufacturing and Wholesale and retail sectors have the highest VAT gaps.