Successful Advances in Fiscal ARchItecture (SAFARI): Evidence from a new tax in Zanzibar

Mobilising domestic revenue is crucial for enabling governments to improve social and economic development through the provision of public services. Consequently, measures to enhance tax revenues have received much attention from policy-makers and researchers. These efforts tend to focus on individual tax bases, ignoring fiscal externalities, i.e. possible effects on revenues from other taxes. Yet, revenue-enhancing policies targeting one tax are likely to affect the collection of other taxes. The introduction of a new tax on commercial properties in Zanzibar offers a unique opportunity to study such effects. The project will (1) examine whether property owners are compliant with the new tax; (2) investigate if the introduction of the property tax (PT) impairs revenues collected from other taxes; and (3) shed light on what the underlying reasons for non-compliance and fiscal externalities might be and how to mitigate them. To do this, we exploit the variation created by the randomised gradual roll-out of the PT in combination with two randomised field experiments, and analyse effects using administrative tax data and our own, tailor-made taxpayer surveys.

The project will be implemented in close collaboration with research staff from Zanzibar Revenue Authority, Institute of Tax Administration and REPOA.