Tax Compliance in Rwanda: Evidence from a Message Field Experiment

Abstract

* This article is part of a broader project on tax compliance in Rwanda carried out in collaboration with the African Tax Administration Forum (ATAF) and the Rwanda Revenue Authority (RRA), with funding from the International Centre for Tax and Development (ICTD). We are extremely grateful to these institutions for the support they have provided throughout the project and especially to ATAF, which has played a vital role through the involvement of Dr Nara Monkam in the broader project. We are particularly thankful to the staff of the RRA for their invaluable inputs and assistance, that made this project possible. We would like to express our gratitude to RRA's officials, at the time of this project: Commissioner General Mr Richard Tusabe, Deputy Commissioner General Mr Pascal Ruganintwali, Deputy Commissioner for Research and Planning Mme Agnes Kanyangeyo, as well as other Deputy Commissioners who provided assistance and feedback throughout the project. Special thanks are due to RRA's Head of Research Mr Denis Mukama, who has coordinated the implementation of the project and has provided excellent inputs throughout the research. We are also very grateful to John Karangwa, Gaudence Uwimana, Lucie Niyigena, Naphtal Hakizimana, Florence Mukakabanda and the entire research and planning unit, as well as Mme Hajara Batamuliza and all officials involved in the letter delivery. This paper benefited from comments provided by Lucio Castro, Laura Paler, Jorge Garcia Hombrados, Carlos Scartascini, anonymous referees, and participants to various conferences and seminars. All remaining errors are our own. Declarations of interest: none.

Visual Nudges: How Deterrence and Equity Shape Tax Compliance Attitudes and Behaviour in Rwanda

“…Other studies include Santoro (2021) in Eswatini: Mascagni et al (2019) in Rwanda;Del Carpio (2014) in Peru; Bergolo, Ceni, Cruces, Giaccobasso and Perez-Truglia (2019) in Uruguay; Lefebvre, Pestieau, Riedl and Villeval (2015) in France, Belgium and the Netherlands; Fellner et al (2013) in Austria;and De Neve et al (2019) in Belgium. 17 More specifically, Mascagni and Nell (2021) find that fiscal exchange messages are only significant in some specifications, and, even when they are, they don't seem to have any additional effect to being a simple reminder. They also highlight how this type of message was only effective when it was delivered by SMS, which did not include a graph summarising public expenditure.…”

“…Part of this literature has focused on large-scale field experiments using messages sent by the tax administration to raise taxpayer compliance (Mascagni 2018;Atinyan and Asatryan 2019). However, low-income countries (LICs) remain largely under-represented in this literature, with only two studies conducting such experiments in Africaor any other lowincome country (Mascagni and Nell 2021;Shimeles, Gurara and Woldeyes 2017).…”

“…Most available tax experiments come from high-income countries 4 and Latin America. 5 Evidence from Africa is almost non-existent, with the exception of Shimeles et al (2017), Mascagni and Nell (2021) and (Santoro et al 2020). The third contribution is to measure the effects of the videos on both tax beliefs and actual behaviour, while the vast majority of the tax experiment literature focuses on reporting decisions only, 6 lacking 2 An example of a video experiment on tax from high-income countries is McGraw and Scholz (1991).…”

“…Perhaps the one with the widest reach is the Taxpayer Appreciation Day, which is a series of events aimed at appreciating and highlighting the contribution of 'good' taxpayers to the public budget and to national development more broadly. Other initiatives include a taxpayer education programme for new taxpayers; seminars dedicated to specific groups, such as firms operating in certain sectors, or businesswomen; tax clubs in schools where students are educated in tax matters from an early age; and various communications with taxpayers via SMS or social media, especially around key deadlines in the taxpaying process (Mascagni and Nell 2021;Mascagni, Santoro and Mukama 2019;Mascagni and Santoro 2018).…”

“…While there is some evidence that such friendly approaches to increase compliance are effective, much still remains unknown about which of the wide variety of RRA initiatives work. For example, previous research has shown that friendly reminders of declaration deadlines can improve compliance by 55 per cent (Mascagni and Nell 2021), while a taxpayer education programme organised by the RRA for new taxpayers increased their probability of submitting a declaration by 30 per cent (Mascagni et al 2019). However, no evidence is currently available on the use of videos to communicate with taxpayers, despite them being particularly suitable for both social media and TV, both of which are used extensively by taxpayers.…”