Lying to the Taxman or Accepting a Helping Hand ? Evidence from a Novel Experiment on SMEs in Tanzania

Revocatus Washington Paul, Ephraim Mdee, Massaga Fimbo, Jonathan George Karver, Zain Chaudhry and Christopher Alexander Hoy

No 11062, Policy Research Working Paper Series from The World Bank

Abstract: This paper presents the results from a novel field experiment that examined the impact of in- creasing the presence of revenue authority officers on tax compliance and tax morale among small and medium-size enterprises in a lower-income country. The experiment was embedded in the implementation of a representative, face-to-face survey of SMEs across mainland Tanzania. An independent survey firm was accompanied by Tanzania Revenue Authority officers, who observed the interviews in a randomly selected set of urban and peri-urban wards. This translated into a temporary increase in the presence of tax officers throughout parts of the country. The findings indicate that an increase in tax officer presence did not have a significant overall impact on tax compliance and tax morale among SMEs, as measured using a combination of administrative and survey data. However, there were short-term increases in compliance in the largest city and sustained increases in tax morale in the rest of the country. A follow-up survey suggests that these results were likely driven by an increase in the perceived credibility of enforcement rather than meaningful increases in perceptions of facilitation and trust.

Date: 2025-02-10
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