Building Fiscal Capacity in Developing Countries: Evidence on the Role of Information Technology
- 1 September 2021
- journal article
- research article
- Published by University of Chicago Press in National Tax Journal
- Vol. 74 (3), 591-620
- https://doi.org/10.1086/715511
Abstract
Weak fiscal capacity is a major challenge in low-income countries. Recently, governments have adopted information technology to modernize tax collection; however, there is little evidence on the impact of such reforms. We narrow this gap using unique administrative firm-level panel data covering all business taxpayers in Ethiopia. We find a robust increase in value-added tax collections and reported sales following the adoption of electronic sales register machines (ESRMs), without decreasing formal employment. These effects are larger among downstream firms. ESRM adoption is also associated with a decrease in entry into downstream sectors.Keywords
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