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To Pay Or Not to Pay? Citizens’ Views on Taxation in Local Authorities in Tanzania

Author: O-H Fjeldstad
Date: 2004
Size: 34 pages (629 KB)

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Summary

Can tax compliance be established in poor countries without an extensive and costly enforcement apparatus? This research, conducted in Tanzania by the Chr. Michelsen Institute, suggests that this question is important because governments, seeking power on the basis of popular consent, face restrictions in their use of coercion in tax collection. The study concludes that the challenge for local government taxation in Tanzania is to raise domestic revenues from consenting citizens.

Widespread tax evasion, reflected in persistent public resistance to pay, is seen as part of the problem of raising local government revenues in Tanzania. Dealing with the policy problem of revenue enhancement and tax evasion requires some understanding of the factors underlying the individual’s decision whether to pay or evade taxes. However, the views of taxpayers are to a large extent ignored in this policy debate. Tanzanian citizens feel they get little in return for taxes paid. This perception has impacts on their willingness to pay and contributes to eroding peoples’ trust in the local government’s capacity to provide expected services. Hence, from a policy perspective, it is a major challenge to provide better linkages between tax compliance and service delivery. To improve compliance it is also important to address the broader problem of free-riding. However, the most serious problem is the misuse of tax revenues by council staff (particularly by tax collectors) and councillors.

It is imperative to establish mechanisms to improving the relations between the local revenue administration and citizens.

To build trust between citizens and the council, information to the public is crucial.
Co-operation between local government officials, councillors and community leaders in setting common goals might be a crucial trust-enhancing device.
The problems of non-payment should be attacked on several fronts, including service delivery, better administration and information schemes, and community involvement.
To achieve this, in depth knowledge and data are required on payment levels for each village and ward.
Citizens should be encouraged to report defaults such as misappropriation of revenues and services not delivered as promised. The prompt redress of such complaints may help convince people that the local authority means business.
Initially, it is advisable to link payment directly to visible improvements in services.

For an improved understanding of tax compliance behaviour in local authorities in Tanzania, there is a need for:

A more thorough examination of the concept of fairness in fiscal exchange.
Analysis of when user charges are to be preferred instead of general taxes to finance public services.
Deeper insight into citizens’ perceptions of the role of the state, how tax law is administrated, perceptions about enforcement and government trustworthiness.
Research focusing on taxpayers’ rights in situations where the government - and donors - are pressing for increased domestic tax effort.

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Source: Fjeldstad, O.-H., 2004, ‘To Pay Or Not to Pay?: Citizens’ Views on Taxation in Local Authorities in Tanzania’, Paper presented at REPOA’s 9th Annual Research Workshop White Sands Hotel, Dar es Salaam, 25-26 March 2004
Author: Chr. Michelsen Institute (CMI), http://www.cmi.no