Template-type: ReDIF-Paper 1.0

Author-Name: James Alm
Author-Workplace-Name: Department of Economics, Tulane University, New Orleans, LA USA
Author-Workplace-Email: jalm@tulane.edu

Author-Name: Zehra Farooq
Author-Workplace-Name: Federal Board of Revenue, Ministry of Finance, Federal Government of Pakistan, Islamabad, Pakistan
Author-Workplace-Email: zehra.farooq@gmail.com

Title: Increasing Tax Collections by Local Governments in Developing Countries by Improving Tax Compliance 

Abstract: When discussing local government taxation in developing countries, it is impossible to avoid the conclusion that most all local governments in most all developing countries around the world simply fail to collect taxes in amounts sufficient to provide desired and needed government services. What accounts for this failure? And what can be done to address this failure? It is these two basic questions what we seek to address -- if not necessarily to answer -- here. Our first conclusion is an obvious and well-known one: the main reason for low tax collections is that local governments in developing countries have been assigned largely unproductive tax sources, taxes that are often difficult to administer, lack buoyancy, and allow little discretion to local governments. Our second conclusion may seem less obvious and in fact is driven largely by results from the tax compliance literature: tax collections, especially property tax collections, can be increased by local government policy initiatives that increase tax compliance by improving citizen trust in government, and these initiatives can be implemented quickly and effectively in many if not all settings. In the process we also discuss several other dimensions of local taxation in developing countries.

Length: 51 pages

Creation-Date: 2024-12

File-URL: https://icepp.gsu.edu/files/2025/01/paper2406.pdf
File-Format: application/pdf

Handle: RePEc:ays:ispwps:paper2406