BREAD 2021: Insights on governance

Blog State, Tax, Tax compliance and governance

The IGC hosted the BREAD Conference on Economics of Africa from 7-9 July and our new blog series explores key findings from research presented during the conference, including the following publicly available papers on governance. Some interesting findings are below.

Good governance is complex, not least because the number of different actors involved: politicians, administrators, other government employees such as frontline healthworkers, and taxpayers. How can local and national governments ensure their systems run smoothly for the benefit of society? These papers tackle the large-scale issues of partisan payments bias and tax compliance.

Rewarding allegiance: Political alignment and fiscal outcomes in local government (Brunnschweiler and Kwebena Obeng 2020)

Finding: Districts in Ghana in which District Chief Executives and MPs belong to the same party receive more transfers and have more internally generated funds and higher expenditures.

In Ghana, District Chief Executives (DCEs) are appointed by the central governing party, while MPs such as mayors or state governors representing the local constituency may be of any party. While both DCEs and MPs are responsible for policymaking in the district, DCEs have more financial means. Despite legislation meant to limit partisan transfers, districts in which MPs are politically aligned with the DCE receive both higher transfers and have higher expenditures. Grants and expenditures are also lower in the middle of the four-year political cycle, regardless of MP alignment.

The social norms and tax compliance in an informal economy setting: Artefactual experimental evidence from Nigeria (Adeniran, Amara Ekeruche, and Onywkwena 2021)

Finding: Providing information about either those penalised for tax evasion or the highest taxpayers in a group improves tax compliance in Nigeria.

Tax compliance in low-tax compliant areas may be improved by appealing to the social influence of peers. Taxpayers were either given all tax information about their peers, concrete information specifically about tax good behaviour, or concrete information specifically about or tax penalties. While being given the full information had no effect compared to those with no information, participants with access to the good behaviour information were 21% more likely to file tax returns and those with access to the penalties information 16 % more likely to file their tax returns. Both the good behaviour and penalties groups were 23% more likely to file their actual income than the full information group.

Disclaimer: The views expressed in this post are those of the authors based on their experience and on prior research and do not necessarily reflect the views of the IGC.