Strengthening Fiscal Contracts Through Digital Town Halls in Freetown, Sierra Leone

Abstract

While fiscal capacity is central for economic growth and political stability, many governments around the world struggle to effectively raise revenue through taxation. One influential argument about the historical development of fiscal capacity is that political leaders can induce voluntary tax compliance by expanding democratic institutions. In this project, we generate evidence to evaluate this theory in contemporary democracies using a large-scale field experiment to study the a participatory budgeting program implemented in Freetown, Sierra Leone. We estimate this intervention’s impact on tax compliance (observed through administrative data) and political attitudes and behaviors, which we capture in three waves of surveys.

Contrary to theory and our expectations, we do not find that the participatory budgeting intervention, on average, increases tax compliance. This null effect is particularly striking given that we do find that the intervention (i) effectively creates opportunities for participants to communicate preferences to government officials (i.e., increases “voice”) and (ii) increases satisfaction with City Council’s service provision and improves perceptions of government responsiveness. However, the average null effect on compliance behavior masks substantial variation in the treatment effect conditional on partisan affiliation—while the intervention increases compliance for co-partisans, we see a backlash amongst non coparitsans. We conclude that attempts to increase compliance by extending opportunities for voice are ensnared in partisan politics.