The willingness of citizens to pay taxes must surely be a strong indicator of their trust in government. In two new reports recently released by the World Bank strong evidence emerges on the effect of citizen engagement on tax morale and tax compliance.
The first examined the Brazilian case, using data from all 5,570 municipalities in the country. Focussing on two types of institutions that municipalities can voluntarily adopt to give citizens the opportunity to voice their preferences on policies and spending: public policy councils and participatory budgeting. Municipalities who adopt these practices collect significantly more local taxes. For instance, the adoption of participatory budgeting leads to the collection of up to 39% more tax revenues. Overall, the increase in municipal budgets is equivalent to roughly 40% of their capital investment spending.
In the second study, were results from the largest cross-country experiment ever conducted on tax morale. A unique online experiment, the study involved 65,000 individuals across 50 countries from all continents. Results show that regardless of government systems, levels of development and culture, citizens are more committed to tax compliance when they:
- are able to voice their preferences about government spending, and
- learn about government oversight of public resources.
We are indebted to Tiago Peixoto for sharing these reports with us. Numerous studies have shown that enforcement efforts cannot fully explain the high degree of tax compliance within society. These new reports point to the importance of using more positive approaches than penalties or condemning those that avoid their responsibilities.
Download the first report: Of Governance and Revenue : Participatory Institutions and Tax Compliance in Brazil
Authors: Michael Touchton, Brian Wampler and Tiago C. Peixoto
Download the second report: Voice and Punishment : A Global Survey Experiment on Tax Morale
Authors: Fredrik M. Sjoberg, Jonathan Mellon, Tiago C. Peixoto, Johannes Hemker and Lily L.Tsai