EconNet: Becoming Legible to the State

Whereas traditional tax evasion models emphasize verifying tax liability amounts, this paper highlights two other tax capacity dimensions of that are of particular relevance in lower-income countries: identifying the tax base and enforcing collection of known liabilities. Leveraging a newly digitized property database, a randomized experiment in Liberia finds that including identifying information (owners' names and property photographs) in tax notices more than quadruples the payment rate, from 2 percent to almost 10 percent, when the notice also details noncompliance penalties. A second experiment finds that signaling greater collection probability to delinquent taxpayers further increases compliance. These results highlight the importance of targeted investments in tax capacity.

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