taxpayers greater opportunities to make complaints or appeals in cases of abuse by tax officials. This, in turn, needs to be coupled with tighter monitoring of abuses by tax officials.

A third source of unfairness lies in arbitrary or highly punitive penalties related to some taxes, both formal and informal. This often appears to be a particular problem with relatively smaller taxes, where enforcement can be highly punitive in some low-income countries.<sup>107</sup> Even for somewhat larger businesses, however, punitive enforcement measures – like closing down businesses – can be a double-edged sword. While they may sometimes be the only means to ensure payment from recalcitrant taxpayers, the application of these penalties can appear arbitrary when unevenly applied, and can give tax collectors enormous leverage in seeking to extract both formal _and_ informal payments from taxpayers.<sup>108</sup> Here the reform goal is, in principle, simple: to put in place penalties sufficient to encourage compliance, but which are not excessive – and, which, critically, are consistently applied. However, there may be significant challenges on the ground. Where taxes are collected face-to-face, some discretion in tax collection may be hard to avoid, and also hard to monitor. Meanwhile, tax collectors may often defend strong penalties, owing to the rent-seeking opportunities they present, which creates a barrier to reform.

Particularly for businesses, the predictability of tax enforcement may figure centrally in compliance decisions. Research suggests that predictability – and not only related to taxation<sup>109</sup> – is very important for businesses, as predictability can facilitate planning and investment, while predictably equitable enforcement ensures a level competitive playing field.<sup>110</sup> Where tax laws are enforced fairly and consistently, firms seem more likely to declare tax obligations honestly based on the promise of avoiding informality, corruption and uncertainty. By contrast, where taxes are enforced inconsistently, firms have little incentive to declare honestly, as such honest behavior is not a guarantee of avoiding informality, corruption and uncertainty – and may disadvantage them relative to their competitors. Reflecting this logic, a recent OECD study goes so far as to use measures of “tax certainty” as a direct proxy for business tax morale, owing to the current absence of alternative measures and survey data.<sup>111</sup> Inappropriate tax policies and problems with revenue forecasting sometimes lie at the root of unfair tax administration. In these cases, successful reform may need to happen “above” the level of administration. In some cases, unfairness is exacerbated by overly complex tax policies. This may be true where tax policies offer significant subjectivity in the assessment of tax liabilities – as with, for example, “market value” systems of property tax assessment, or presumptive tax systems based on administrative estimation of turnover. It may equally be true where tax policies are so

> 107 Fjeldstad, O-H., & Therkildsen, O. (2008). Mass taxation and state-society relations in East Africa. in Brautigam, D., Fjeldstad, O-H., & Moore, M. (Eds.) _Taxation and state building in developing countries: capacity and consent._ Cambridge: Cambridge University Press; Fjeldstad, O-H., & Semboja, J. (2001). Why people pay taxes: The case of the development levy in Tanzania." _World Development_ , 29 (12):2059-2074.

> 108 This can be an issue even in relatively high capacity contexts. According to anecdotal evidence South Africa, for example, has seen increasing complaints from taxpayers about what they view as aggressive application of penalties – and sometimes extra-legal behavior by tax collectors.

> 109 Campos, J. E., Lien, D., & Pradhan, S. (1999). The impact of corruption on investment: Predictability matters. _World Development_ , 27 (6):1059-1067.

> 110 Hassan, M., & Prichard, W. (2016). The political economy of tax reform in Bangladesh: Political settlements, informal institutions and the negotiation of reform. _Journal of Development Studies_ , 52 (12):1704-1721.

> 111 OECD. What is driving tax morale. _Public Consultation Document_ . Paris: Organisation for Economic Cooperation and Development.

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