Informal taxation and redistribution: a study of community driven provision of public goods in Myanmar

Project Active from to State and State Effectiveness

Informal taxation is a crucial source of public goods financing in many developing countries. In Myanmar, data collected by the IGC in 2016 showed that financial payments to non-state actors and direct contributions to development projects amount to about 8% of total household expenditure, twice as much as direct tax payments (McCarthy, 2016). These resources are channelled towards the delivery of a broad range of social services, and finance the construction of urban and rural infrastructure, most notably roads.

The Government of Myanmar recognises the importance of informal revenue mobilisation and has traditionally encouraged direct contributions to local development projects.  Moreover, informal taxation and the local infrastructure it finances can be thought of as an integral part of the country’s decentralisation process.  The literature on decentralisation suggests that these institutions might, therefore, expand the supply of public goods and its accountability (Bardhan and Mookherjee, 2006).

Notwithstanding the potential advantages of informal taxation as a source of local development financing, the limited literature on the topic highlights potential trade-offs and unanswered research questions that this project seeks to explore.

Myanmar offers an ideal setting for research on informal taxation. Contributions are large and widespread, and a substantial share of these is mobilised for the construction of secondary roads. Communities keep detailed accounts of individual contributions to these projects. Development Affairs Organisations (DAOs), a branch of subnational governments, collect and store data on each road being built, including technical details, government-provided inputs and delivery timeline.

The primary objective of this pilot project is to access and analyse this data in collaboration with local government stakeholders. To this end, high-level meetings with public officials and qualitative interviews with local leaders have been organised in Mandalay, Myanmar’s second-largest city. As part of these visits, a thorough assessment of administrative data will be carried out, together with discussions on how to leverage this information for both research and policy needs.