Tax evasion is a widespread problem worldwide and particularly in low income countries. This project focuses on Value Added Tax (VAT). The VAT has emerged as one of the main modes of raising government revenue globally, but has significantly under-performed in Africa. Like governments in many other African countries, the Government of Tanzania has been striving to improve the effectiveness of the VAT regime by reducing tax evasion. A key initiative was the introduction of Electronic Fiscal Devices (EFDs) issuing VAT-receipts in 2010. Despite the EFDs, VAT collection has not improved as expected. A recent study from Dar es Salaam shows that a possible explanation for the limited success of the EFDs is that businesses do not always use the machine to issue receipts. The current project suggests a potential policy to increase the issuance of EFD receipts, namely to reward customers to ask for them. More specifically, we will conduct a randomized field experiment with a lottery. VAT receipts are used as tickets in the lottery, and the probability of winning is proportional to the amount spent. The idea is that increasing the issuance of EFD receipts will make more information about transactions made available to the government. This, in turn, makes enforcement easier, and is therefore expected to increase VAT compliance. In addition to studying the effect of the lottery on tax revenues, we will examine the effect of taxation on business development by investigating how the VAT affects the prices paid by the customers, business outcomes and formalization. The project will be implemented in collaboration with the Research, Policy and Planning Department of the Tanzania Revenue Authority

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