Research

Tax audits are essential for governments to raise revenue but they can create economic distortions. To avoid the financial burden of an audit, firms may remain small, move to the informal sector, or shut down. Leveraging detailed administrative tax data from the Ugandan Revenue Authority (URA), a novel linked survey, and a regression discontinuity design (RDD), we show that audits have a dual negative effect in our context: They reduce the tax revenue collected from audited firms \textitand impose large economic distortions. Audited firms are 11 percentage points (p.p.) likelier to shut down, and those that remain operational reduce their output. The former result is driven by firms that must pay substantial back taxes and the latter by firms that believe they are likely to be audited again soon. Back-of-the-envelope calculations indicate that comprehensive audits lead to an overall revenue loss and, to the first order, an aggregate output loss. Our results demonstrate that comprehensive audits impose large costs on audited firms and ultimately hurt both revenue collection efforts and the real economy.

We use information on firms’ trading networks from VAT return data to design a randomized tax compliance intervention in Uganda. In treated pairs, either the seller, the buyer, or both receive letters listing discrepancies detected in past tax returns. The amendment rate is 22 percentage points higher in the treatment group, compared to 1.8% in the control group. We find spillover effects within treated firm pairs and in transactions with their untreated trading partners. Overall, there is a small increase in VAT liability for the amended returns. The intervention also leads to fewer discrepancies in subsequent tax declarations.

Early fertility is thought to be one of the key barriers to female human capital attainment in sub-Saharan Africa, yet contraceptive take-up remains puzzlingly low, even among highly-educated populations with healthcare access. We study a barrier to hormonal contraceptive uptake that, while recognized in the qualitative literature, has not been causally tested: the persistent (incorrect) belief that these contraceptives cause later infertility. This belief creates a perceived tradeoff between current and future reproductive control. We use a randomized controlled trial with female undergraduates at the flagship university in Zambia to test two interventions to increase contraceptive use. Despite high rates of sexual activity, low rates of condom-use, and near zero desire for current pregnancy, only 5% of this population uses hormonal contraceptives at baseline. Providing a non-coercive conditional cash transfer to visit a local clinic – greatly reducing access costs – only temporarily increases contraceptive use. However, pairing this transfer with information addressing fears that contraceptives cause infertility has a larger initial effect and persistently increases contraceptive take-up over 6 months. This treatment reduces beliefs that contraceptives cause infertility and leads to the take-up of longer-lasting contraceptives like injections. Compliers are more likely to cite fear of infertility as the reason for not using contraceptives at baseline. IV estimates indicate that eliminating the belief that contraceptives cause infertility would more than triple contraceptive use.