Effects of targeted border taxes on formalization and tax compliance in Zambia

Kwabena Adu-Ababio, Maria Jouste, Karri Vuoristo, Mutemwa Mebelo and Juliet Musalale

No wp-2026-78, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: A large informal sector creates hard-to-tax firms. However, such firms, due to their imports, are observed by the tax authority. Using an institutionalized policy that seeks to regularize non-compliant and inconsistent filing firms through a bespoke border tax in Zambia, we examine the effects of the advance income tax (AIT) on firm registration and tax compliance. Our identification strategy relies on difference-in-differences designs to causally estimate these effects across the rate hike, discontinuation, and reinstatement phases of the AIT policy.

Keywords: Tariffs; Taxation; Business tax; Tax evasion; Tax compliance (search for similar items in EconPapers)
Date: 2026
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