Technology and the state: Building capacity to tax via text

• Published in: Journal of public economics Vol. 236; p. 105154
• Main Author: Cohen, Isabelle
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.08.2024
• Subjects: Developing countries; Fiscal exchange; Service provision; State capacity; Taxation; Developing countries; Taxation; Fiscal exchange; State capacity; Service provision
• ISSN: 0047-2727; 1879-2316
• DOI: 10.1016/j.jpubeco.2024.105154

The ability of the state to collect tax revenue is a crucial indicator in the process of economic development, yet the functioning of tax compliance in low-capacity countries remains poorly understood. Using a randomized evaluation, I study a simple text message reminder scheme implemented by the Uganda Revenue Authority, which increases tax compliance by 7%. This average effect masks substantial treatment effect heterogeneity by an index of the presence of public services, measured via a granular, nationwide dataset on government service provision. The finding that the treatment was most effective where the state is least present shows how digital technology can extend beyond the brick-and-mortar presence of the government, expanding the reach of the state. •Text message reminders increased tax payment rates among Ugandan taxpayers by 7%.•Taxpayers in areas with the lowest presence of public services were most affected.•Reminders may be more impactful where the state is less present.