When tax officials visit: why softer tax outreach can build trust in some places and erode it in others

Across sub-Saharan Africa, revenue authorities are increasingly changing how they engage with small businesses.

The traditional approach involved audits, penalties and inspections.

But more recently many are investing in taxpayer education, “door-to-door” visits, and focusing on ways to make it easier to comply.

The logic driving the change is that auditing every small trader is expensive and unpopular, while building trust appears cheaper and more durable.

Our new International Centre for Taxation and Development study in Tanzania suggests the story is more complicated.

We worked closely with the revenue authority to carry out a large trial where we increased the presence of tax officials in some randomly selected wards and measured the impact on trust and compliance.

This study drew on our experience running trials with revenue authorities in several other lower income countries.

Our research shows that even when tax officials are not there to “check up on you”, their visibility can change how small businesses see the state.

And not always in the direction policymakers expect.

In wealthier, more economically integrated regions, our study showed that the presence of tax officials strengthened trust and was associated with higher compliance.

In poorer and more marginalised regions, the same presence reduced trust and lowered tax payments.

The implication is uncomfortable but important: light-touch outreach doesn’t automatically build trust.

The relationship between the national government and citizens varies, depending on the presence of public services, and this influences how people view tax officials.

What makes our study especially useful is that we connected survey responses to administrative tax records.