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 the overall revenue collected from audited firms declines. The total wage bill loss induced by the audits is equivalent to 0.2-0.6% of the total wage bill of the formal economy at baseline, suggesting that the auditing process potentially imposes a large distortion to the Ugandan economy.

Can knowledge of buyer-seller networks be leveraged to improve tax compliance? We explore this question through a randomized controlled trial in Uganda. Using transaction-level VAT data, we construct firm networks and identify discrepancies in amounts reported by trading partners. Enforcement letters highlighting these discrepancies are sent to either the seller, the buyer, or both. The correction rate in the treatment group is 23.8%, fourteen times higher than the 1.6% in the control group. This response is asymmetric: corrections are primarily made by sellers, even when only buyers receive letters, providing evidence that some firms induce a change in their partners’ tax reporting behavior. Spillover effects extend to transactions not listed in the letters, including those involving other trading partners. The intervention also results in sustained improvements in reporting behavior over subsequent months.

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.

Making use of a rich administrative dataset on Ugandan firms’ tax filings covering the period 2013–2021, this paper investigates the impact of tax audits on voluntary compliance, contrasting the effect of one versus multiple audits. Using a matched Difference-in-Differences approach with similar unaudited firms as controls, and a stacked design to address staggered treatment timing, the analysis shows that among firms that consistently file taxes over the study period, audits induce higher value-added tax (VAT) liabilities. Crucially, this is \textitentirely driven by firms receiving multiple audits, underlining the importance of repeated interactions with the tax authority for fostering compliance among this set of taxpayers.