# **Accountability**

While the desire for reciprocity captures taxpayers’ interest in receiving public goods and services, a demand for accountability captures the desire for an institutionalized voice in shaping how tax and spending decisions are made. Of course, the goals of reciprocity and accountability are overlapping: the goal of accountability is, often, to provide an institutionalized way for taxpayers to demand and ensure reciprocity. But they are also meaningfully distinct. Where reciprocity implies governments making potentially time-limited concessions to taxpayers, institutionalized accountability is intended to ensure that reciprocity is sustained. As importantly, accountability may have independent value to those who are granted a voice in shaping tax and spending decisions.

Evidence suggests that lower levels of corruption, as well as participatory budgeting and other forms of direct democracy, are associated with higher tax compliance. This underscores the importance of accountability in shaping trust in tax systems. For example, a recent cross-national survey experiment carried out by the World Bank finds that interventions which increase the salience of anti-corruption efforts and allow citizens to state their expenditure preferences to the government result in sizable and significant increases in tax morale relative to a control group.<sup>147</sup> Two studies from Brazil yield similar findings. In one the authors find that evidence of corruption reduces property tax receipts, and increases demands for participatory budgeting.<sup>148</sup> A World Bank study demonstrates that the presence of participatory governance institutions is closely associated with the ability of municipal governments to raise local tax revenue.<sup>149</sup> The research shows that Brazilian municipalities that voluntarily adopt participatory institutions collect significantly higher levels of taxes than other, similar municipalities without these institutions. Similarly, earlier research from Switzerland found that tax compliance is substantially higher in cantons with larger reliance on direct democracy, including fiscal referendums.<sup>150</sup> Somewhat more broadly, research has argued that tax collection and compliance often increase following the election of new governments, because of renewed popular trust following successful elections.<sup>151</sup> The importance of accountability in shaping trust and tax compliance among business taxpayers has been comparatively under-researched, though some key messages have begun to emerge. In general, relative to individuals, businesses appear more concerned about the creation of specific, and comparatively narrow, forums for participation in shaping government action, as these forums may most directly address their core interests and concerns. In Ethiopia, concerns about the arbitrary application of presumptive taxes on small businesses led state governments to invite business associations to joint assessment committees.<sup>152</sup> In Ghana, initial efforts to tax the informal sector were pursued through the introduction of “associational taxation” by which tax collection

> 147 Sjoberg, F., Mellon, J., Peixoto, Hemker, J., & Tsai, L., (2019). Voice and Punishment: A Global Survey Experiment on Tax Morale. . _World Bank Policy Research Working Paper 88558855._ Washington: World Bank.

> 148 Timmons, J., & Garfias, F. (2015). Revealed corruption, taxation and fiscal accountability: Evidence from Brazil. _World Development_ , 70:13-27.

> 149 Touchton, M., Wampler, B., & Peixoto, T. (2019). Of governance and revenue: Participatory institutions and tax compliance in Brazil. _World Bank Group, Policy Research Working Paper 8797._ Washington: World Bank.

> 150 Torgler, B. (2005). Tax morale and direct democracy. _European Journal of Political Economy_ , 21:525-531.

> 151 Prichard, W. (2015). _Taxation, responsiveness and accountability in developing countries: The dynamics of tax bargaining_ . Cambridge: Cambridge University Press.

> 152 Ibid.

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