Improving Tax Compliance in Developing Economies: Evidence from Bangladesh. IGC Working Paper
Improving tax revenue collection is an important priority for developing economies throughout the world. Not only do tax revenues tend to be low as a share of GDP in absolute terms in low income countries, they are also low as a share of GDP relative to higher income economies. Finding mechanisms to improve tax collection is challenging on at least two fronts: (1) lack of good data on tax compliance; and (2) difficulty in finding effective instruments for improving compliance given institutional constraints. This paper makes three main contributions. First, we present new evidence on compliance patterns from a unique primary dataset in Bangladesh that links administrative tax data with firm survey data. Second, we propose an innovative mechanism to improve compliance using the power of social recognition, and present survey evidence that supports the potential power of such mechanisms. Finally, we summarize the research design for a planned field experiment that will directly test the causal effects of various forms of social recognition on voluntary compliance.
Nasiruddin Ahmed; Raj Chetty; Mushfiq Mobarak; Aminur Rahman; Singhal, M. Improving Tax Compliance in Developing Economies: Evidence from Bangladesh. IGC Working Paper. International Growth Centre (IGC), London, UK (2012) 23 pp.