Fiscal capacity and tax revenues in Uganda

Fiscal capacity is one of the most important constraints on economic growth (Besley and Persson, 2013). In developing countries, the state’s ability to tax its citizens is typically limited by (a) the cost of acquiring accurate information on taxable activities, and (b) the tax agency’s capacity to enforce the tax rules. The literature has highlighted the central role of information flows for fiscal capacity (Kleven, Kreiner, and Saez, 2009), and of civil servants’ characteristics on government capacity/performance (e.g. Dal Bo, Finan, and Rossi, 2013). In this project we investigate the effect of improving the use of information, and human capital, on tax revenues in Uganda, a country at the bottom of the distribution of tax-to-GDP ratios (12.5% in 2012). The project is carried out in collaboration with the Uganda Revenue Authority.