including bargains with elite taxpayers, reform design to manage resistance from the general population, and politics within the tax administration is beyond the scope of this paper and is extensively discussed in the political science literature (e.g. Martin 2023, Moore et al 2018, Pritchard 2019, Brautigam et al 2008, among others). Instead, we focus the discussion below on evidence relating to factors that determine political choices to invest in tax capacity or to deploy existing capacity.

Broadly, we can consider politicians as weighing the expected benefits and costs of taxation for re-election prospects. On the one hand, higher tax revenues may support re-election by funding the provision of public services, infrastructure investments, social protection, and other public programs that citizens value. On the other, taxing citizens may harm re-election by raising citizen expectations and demands for accountability. Interestingly, this accountability effect can be triggered by simply demanding taxes regardless of whether those taxes are paid. A study of a doorto-door property tax campaign in Kananga, DRC, found higher levels of citizen engagement even among those who were visited by tax authorities but did not comply (Weigel, 2020). More broadly, there exists cross-country evidence that tax collection declines prior to competitive elections, suggesting that governments act strategically to avoid negative backlash from citizens (Prichard, 2018).

We discuss below three key factors that may shape the cost-benefit calculus of politicians in determining how much taxation to pursue: alternative revenue sources, political competition, and available technologies for reducing the salience and cost of collection. Alternative revenue sources may outright dampen the impetus to tax. Oil-rich states are a prominent example of a low-tax, lowaccountability setting, where oil revenues support a high level of public spending without the need to tax citizens. For instance, oil rich gulf countries collect on average 3.6 percent of GDP as taxes (UNU-WIDER Government Revenue Dataset 2022). At the subnational level, transfers from the central government may dampen the motivation for local taxation. In Brazil, jurisdictions hit by a negative shock to federal transfers resulting from an update in their population count increased local tax collection by approximately 30 percent (Ferraz et al., 2023). Localities achieved these expansions of tax collection by broadening the tax base through increased investment in tax capacity, like improving property-tax registers and higher spending on tax agents.

The remarkable expansion of tax collection in Lagos State, Nigeria, offers an interesting historical case indicating the role of political competition, alongside other factors, in generating political support for taxation. Nigeria’s government has a strong reliance on oil revenues and correspondingly low levels of non-resource tax collection, with only about 6 percent of GDP collected in non-oil taxes. Following the return to democracy in 1999, Lagos state recorded a dramatic growth in annual tax revenues (Figure 4), from about ₦30 billion in 1999 to over ₦150 billion in 2011 (measured in Nigerian naira in 2010 prices),<sup>11</sup> amounting to a fivefold increase in a little over a decade, before the growth tapers off. This revenue growth was greater than in the rest of the country.

> 11 At 2010 exchange rate of 150 Naira to 1 USD, this is equivalent to growth from 200 million USD to 1 billion USD.

17