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- Many developing countries suffer from low levels of tax collection due to a mix of poor enforcement, tax evasion, and corruption. As a share of GDP, tax revenues are 45% lower in poor countries than in developed countries which has negative ramifications for public services.
- At the same time, governments face constraints in providing incentives to civil servants, such as tax collectors, to perform their jobs well. However, government managers are able to provide incentives through their control of where civil servants are posted as a result of good and bad performances in their roles.
- This brief examines whether a competition, or tournament, for postings could affect tax inspectors’ performance in collecting tax revenue using a randomised control trial.
- The researchers find that using postings as an incentive can be an extremely cost-effective way to improve performance and that the promise of performance-based postings substantially raised tax revenues. However, the results also suggest that applying them too often may be counterproductive.