Template-type: ReDif-Paper 1.0
Author-Name: Dietrich, Stephan
Author-workplace-name: Maastricht Graduate School of Governance, RS: GSBE MGSoG, RS: UNU-MERIT Theme 2
Author-Name: Markhof, Yannick
Author-workplace-name: Maastricht Graduate School of Governance, RS: GSBE MGSoG
Author-Name: Vincent, Rose Camille
Title: The cost of bureaucratic fragmentation: Business tax evasion and revenue mobilization in a low-income country
Abstract: We provide novel evidence on bureaucratic fragmentation and weak tax administrations as central enablers of low revenue mobilization in low-income countries. In collaboration with the municipal and national tax authorities in Kampala, Uganda, we cross-link previously siloed tax records for 155,000 firms and conduct a large-scale experiment with 60,000 firms. We document pervasive and selective tax evasion: only 14% of verifiably active firms comply with both government tiers. Cross-record linkage almost triples detectable non-compliance while offering increased enforcement efficiency. This coordination dividend is left untapped. Firms exploit the resulting loopholes through partial informality, re-registering under new identities, and strategic late payments. In a cross-authority field experiment, deterrence nudges, including messages signaling inter-authority coordination, fail to offer a light-touch alternative to addressing fragmentation directly. Our findings establish bureaucratic fragmentation as a distinct and costly source of passive waste in tax administration that existing approaches to revenue mobilization rarely address.
Keywords: Taxation, Tax evasion, Tax administration, Low-income countries, Nudges
Classification-JEL: h26,h20,h71,c93,o12
Series: UNU-MERIT Working Papers
Creation-Date: 20260528
Number: 007
File-URL: https://cris.maastrichtuniversity.nl/ws/files/312285825/wp2026-007.pdf
File-Format: application/pdf
File-Size: 2570272
Handle: Repec:unm:unumer:2026007
DOI: 10.53330/QOHL2233