Technology and local tax capacity: Evidence from Ghana

Project Active from to State Effectiveness and State

This project emerged as a follow-up to the extensive census of local tax capacity conducted in collaboration with the Ministry of Local Government and the head of Local Government Services in 2018. One major finding that stood out was that most local governments lack technological support in the creation of property registries, the valuation of properties, and the collection of property taxes. Results from this small-scale pilot showed that tax collection in the technology-based group increased by 75% relative to the labour-based group. The pilot suggests that this increase in revenue was in part channelled through a reduction in leakage, and 90% of households in the technology group claim that they prefer this new system to the status-quo system.

The project seeks to scale the pilot study to a larger sample size to permit the estimation of precise impacts for policy design. First, it will compare the cost-effectiveness of the technology which assists the collectors with the cost-effectiveness of technology which assists the households (through mobile money payments). Second, it will investigate whether technology-based enforcement capacity is a complement, or substitute, to voluntary compliance. This large-scale seeks to understand if specific mechanisms have to be put in place to ensure that technology helps to enforce a property tax that is progressive across the housing wealth distribution.