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PARTNERS
The Participation
Dividend of Taxation:
Property Tax Collection
in Congo
CASE STUDY
Researched by Dr Jonathan L. Weigel,​
Published on The Quarterly Journal of Economics (2020)
Summarised by Soukayna Remmal
Presentation Outline
• Introduction: Property taxation in low-capacity and
fragile settings
• About this case study
• Empirical design of the Randomized Control Trial (RCT)
• Key Findings
• Tax collection as a signal of state capacity
• Policy implications
Introduction: Property Taxation in low-
capacity and fragile settings
• Property taxes have significant revenue potential and
are non-distortionary, progressive and easily linked to
public services – but are nonetheless severely
underused in almost all developing countries.
• In developed countries, property taxes are the mainstay
of local funding, with collection amounting to 2.2% of
GDP on average, while in Africa, it averages a mere
0.38%.
• With many African cities booming, this represents a
significant opportunity: if they could increase the
proportion of tax collected from a property, they could
do much more to improve the quality of life of their
communities.
Aerial view of Kananga - © Antonio Martinez 2019
About this article
• This article was published in the The Quarterly Journal
of Economics, Volume 135, Issue 4, November 2020, .
• It tests the hypothesis according to which tax collection
will cause citizens to participate more in politics.
• This study relied on the first-ever property tax
campaign to neighbourhoods of Kananga, conducted
by the Provincial Government of Kasai Central in the
Democratic Republic of Congo (DRC) from April to
December 2016.
• The researcher examined a field experiment
randomizing property tax collection across 356
neighbourhoods and covering more than 27.000
properties.
Empirical design of the Randomised Control
Trial (RCT)
• Of 356 neighbourhoods in Kananga — covering over
100,000 households — the research randomly assigned
253 to treatment.
• In treatment neighbourhoods, tax collectors went
collecting the property tax, which is roughly $2 per
household and equivalent to median daily income.
• Control neighbourhoods kept the old declarative
which citizens were supposed to pay at the bank
themselves, but in practice, less than 1% did
(compliance was near zero because the government
had never before tried to enforce the tax).
Tax collectors in Kananga 2017
"The tax campaign was the
first time most citizens had
been registered by the state
or asked to pay formal taxes.
It raised property tax
compliance from 0.1% in
control to 11.6% in
treatment."
Key findings (1/3)
• Despite the state’s low capacity, the campaign
increased reported visits from tax collectors by
81.5% and increased taxpayer registration by
78.8 %.
• The 2016 campaign raised citizen payment of
the property tax by 11%, up from 0.6% in control
neighbourhoods.
• Total property tax receipts in 2016 were $57,294,
about 4% of total provincial receipts.
Key findings (2/3)
• It also increased political participation by about
5%, as 31% of citizens in taxed neighbourhoods
were more likely to attend town hall meetings
hosted by the government or submit evaluations
of its performance.
• To participate in these ways, the average citizen
incurred costs equal to their daily household
income, and treated citizens spent 43% more
than control group citizens.
Participants at a townhall meeting in Kananga, 30 January
2017
Key findings (3/3)
The results suggest that broadening the tax base
has a “participation dividend,” a key idea in
historical accounts of the emergence of inclusive
governance in early modern Europe and a common
justification for donor support of tax programs in
weak states.
Tax collection as a signal of state
capacity
• The paper provides the first field-experimental
evidence that tax collection triggers engagement
with the state.
• Signaling mechanism: The research posits
that in a low-capacity setting, the fact that the
state was able to administer a citywide door-to-
door tax collection campaign sent a potent
signal about its ability to intervene meaningfully
in society.
• As citizens realize that the state has higher
capacity than they previously thought
(informational capacity, and spending capacity) ,
they start exerting more effort to have a voice in
determining future public policy — whom the
government taxes and what services it provides.
Policy implications of the findings
• The study concludes that the signaling
mechanism is relevant not only in the DRC, but
also to all states seeking to build rudimentary
tax capacity.
• For policymakers advocating taxation to
promote government accountability, this study
confirms the link between tax collection and
citizen engagement with the state.
• The researcher argues that one implication of
this study is that governments may anticipate
large increases in political participation from
enforcing direct taxes like the property tax.
• Moreover, minimizing citizen participation may
thus offer a political economy explanation for
why many nondemocratic governments in poor
countries underuse direct taxation mechanisms,
preferring less efficient and more regressive tax
structures than is typically deemed optimal
(Gordon and Li 2009).
Roles for civil society in supporting taxpayer
engagement (1/2)
• Civil society may further contribute to more
equitable taxation by strengthening the ability of
taxpayers to hold governments to account.
• To do so, it may encourage popular
mobilisation around tax issues to improve the
ways that revenues are used and may serve
as a platform to support broader demands
for accountability.
• however, such positive tax bargaining is far from
guaranteed: it depends, most fundamentally, on
taxpayers being able to mobilise and wield the
power necessary to make effective demands on
governments.
Roles for civil society in supporting taxpayer
engagement (2/2)
• Civil society can play an effective role in improving
taxpayer engagement by acting in three key ways:
• As a translator, to make tax information and
more accessible and meaningful to taxpayers.
CSOs can ensure that information accessible to
average taxpayers, adapted to local contexts,
aligned with local priorities, and shared through
appropriate channels.
• As a trainer, by sharing tax knowledge and
taxpayers and/or community leaders the skills
necessary to make sense of tax revenues and
public expenditures.
• As an enabler of taxpayer engagement,
encouraging taxpayers to make demands to the
government. CSOs can provide a safe, secure,
sincerely open spaces for dialogue between
taxpayers and government officials or may help
taxpayers develop collective demands and
more constructively in public forums.
Additional material
• Read: ICTD - The Participation Dividend of Taxation in DRC and
Beyond: Recent Evidence and Paths for Future Inquiry
https://www.ictd.ac/blog/participation-property-taxation-
taxation-drc/ ​
• Read: Prichard, W (2015), Taxation, Responsiveness and
Accountability in Sub-Saharan Africa: The Dynamics of Tax
Tax Bargaining, Cambridge: Cambridge University Press. ​
Press. ​
• Watch: Econimate - How to Increase Tax Revenue in Poor
Countries https://www.youtube.com/watch?v=tCcFIrD_gVg ​
PARTNERS
Thank you!

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Property Tax Case Study - ICTD Learning Portal.pptx

  • 1. PARTNERS The Participation Dividend of Taxation: Property Tax Collection in Congo CASE STUDY Researched by Dr Jonathan L. Weigel,​ Published on The Quarterly Journal of Economics (2020) Summarised by Soukayna Remmal
  • 2. Presentation Outline • Introduction: Property taxation in low-capacity and fragile settings • About this case study • Empirical design of the Randomized Control Trial (RCT) • Key Findings • Tax collection as a signal of state capacity • Policy implications
  • 3. Introduction: Property Taxation in low- capacity and fragile settings • Property taxes have significant revenue potential and are non-distortionary, progressive and easily linked to public services – but are nonetheless severely underused in almost all developing countries. • In developed countries, property taxes are the mainstay of local funding, with collection amounting to 2.2% of GDP on average, while in Africa, it averages a mere 0.38%. • With many African cities booming, this represents a significant opportunity: if they could increase the proportion of tax collected from a property, they could do much more to improve the quality of life of their communities.
  • 4. Aerial view of Kananga - © Antonio Martinez 2019
  • 5. About this article • This article was published in the The Quarterly Journal of Economics, Volume 135, Issue 4, November 2020, . • It tests the hypothesis according to which tax collection will cause citizens to participate more in politics. • This study relied on the first-ever property tax campaign to neighbourhoods of Kananga, conducted by the Provincial Government of Kasai Central in the Democratic Republic of Congo (DRC) from April to December 2016. • The researcher examined a field experiment randomizing property tax collection across 356 neighbourhoods and covering more than 27.000 properties.
  • 6. Empirical design of the Randomised Control Trial (RCT) • Of 356 neighbourhoods in Kananga — covering over 100,000 households — the research randomly assigned 253 to treatment. • In treatment neighbourhoods, tax collectors went collecting the property tax, which is roughly $2 per household and equivalent to median daily income. • Control neighbourhoods kept the old declarative which citizens were supposed to pay at the bank themselves, but in practice, less than 1% did (compliance was near zero because the government had never before tried to enforce the tax).
  • 7. Tax collectors in Kananga 2017
  • 8. "The tax campaign was the first time most citizens had been registered by the state or asked to pay formal taxes. It raised property tax compliance from 0.1% in control to 11.6% in treatment."
  • 9. Key findings (1/3) • Despite the state’s low capacity, the campaign increased reported visits from tax collectors by 81.5% and increased taxpayer registration by 78.8 %. • The 2016 campaign raised citizen payment of the property tax by 11%, up from 0.6% in control neighbourhoods. • Total property tax receipts in 2016 were $57,294, about 4% of total provincial receipts.
  • 10. Key findings (2/3) • It also increased political participation by about 5%, as 31% of citizens in taxed neighbourhoods were more likely to attend town hall meetings hosted by the government or submit evaluations of its performance. • To participate in these ways, the average citizen incurred costs equal to their daily household income, and treated citizens spent 43% more than control group citizens.
  • 11. Participants at a townhall meeting in Kananga, 30 January 2017
  • 12. Key findings (3/3) The results suggest that broadening the tax base has a “participation dividend,” a key idea in historical accounts of the emergence of inclusive governance in early modern Europe and a common justification for donor support of tax programs in weak states.
  • 13. Tax collection as a signal of state capacity • The paper provides the first field-experimental evidence that tax collection triggers engagement with the state. • Signaling mechanism: The research posits that in a low-capacity setting, the fact that the state was able to administer a citywide door-to- door tax collection campaign sent a potent signal about its ability to intervene meaningfully in society. • As citizens realize that the state has higher capacity than they previously thought (informational capacity, and spending capacity) , they start exerting more effort to have a voice in determining future public policy — whom the government taxes and what services it provides.
  • 14. Policy implications of the findings • The study concludes that the signaling mechanism is relevant not only in the DRC, but also to all states seeking to build rudimentary tax capacity. • For policymakers advocating taxation to promote government accountability, this study confirms the link between tax collection and citizen engagement with the state. • The researcher argues that one implication of this study is that governments may anticipate large increases in political participation from enforcing direct taxes like the property tax. • Moreover, minimizing citizen participation may thus offer a political economy explanation for why many nondemocratic governments in poor countries underuse direct taxation mechanisms, preferring less efficient and more regressive tax structures than is typically deemed optimal (Gordon and Li 2009).
  • 15. Roles for civil society in supporting taxpayer engagement (1/2) • Civil society may further contribute to more equitable taxation by strengthening the ability of taxpayers to hold governments to account. • To do so, it may encourage popular mobilisation around tax issues to improve the ways that revenues are used and may serve as a platform to support broader demands for accountability. • however, such positive tax bargaining is far from guaranteed: it depends, most fundamentally, on taxpayers being able to mobilise and wield the power necessary to make effective demands on governments.
  • 16. Roles for civil society in supporting taxpayer engagement (2/2) • Civil society can play an effective role in improving taxpayer engagement by acting in three key ways: • As a translator, to make tax information and more accessible and meaningful to taxpayers. CSOs can ensure that information accessible to average taxpayers, adapted to local contexts, aligned with local priorities, and shared through appropriate channels. • As a trainer, by sharing tax knowledge and taxpayers and/or community leaders the skills necessary to make sense of tax revenues and public expenditures. • As an enabler of taxpayer engagement, encouraging taxpayers to make demands to the government. CSOs can provide a safe, secure, sincerely open spaces for dialogue between taxpayers and government officials or may help taxpayers develop collective demands and more constructively in public forums.
  • 17. Additional material • Read: ICTD - The Participation Dividend of Taxation in DRC and Beyond: Recent Evidence and Paths for Future Inquiry https://www.ictd.ac/blog/participation-property-taxation- taxation-drc/ ​ • Read: Prichard, W (2015), Taxation, Responsiveness and Accountability in Sub-Saharan Africa: The Dynamics of Tax Tax Bargaining, Cambridge: Cambridge University Press. ​ Press. ​ • Watch: Econimate - How to Increase Tax Revenue in Poor Countries https://www.youtube.com/watch?v=tCcFIrD_gVg ​