substitute for _actual_ improvements in public services in a context where citizens are generally dissatisfied. A letter from the tax administration stressing the links between taxes and services may improve short term compliance – but what happens over the longer term if there are no subsequent improvements in services? Meanwhile, the increases in compliance reported in these studies, while certainly important, remain relatively small compared to overall revenue leakage. Perhaps reflecting these challenges, studies about such letter- and SMS-based communication campaigns seeking to highlight tax-expenditure links have produced somewhat inconsistent evidence across countries, suggesting that their effectiveness might be at least partly context-specific.<sup>142</sup> If relying on transparency or communication-based initiatives seems inadequate to increase trust, earmarking revenues is an option. Earmarking is a way to more explicitly link specific revenue collection to specific public expenditures either formally or informally. Such earmarking can range from simple government declarations that new revenues will be used for specified purposes, to formal legal commitments. Legal commitments can be more or less binding in practice depending on the extent of budgetary fungibility.<sup>143</sup> When the commitments are genuine, a small but growing body of evidence suggests that they can increase taxpayer trust and support for expanded taxation, while also strengthening the translation of revenues into public services.<sup>144</sup> The best documented example comes from Ghana, where the government earmarked increases in the VAT rate for, respectively, a Ghana Education Trust Fund and the National Health Insurance Scheme, in both cases also creating new oversight mechanisms to ensure that these promises were executed.<sup>145</sup> However, there are important trade-offs in drawing increasingly explicit ties between taxes and services. Conceptually, taxes are generally intended to be _unrequited_ payments to government, and such earmarking risks creating expectations – particularly among the wealthy – that they should receive quite narrow and direct benefits from tax payments. More pragmatically, the expansion of earmarks can create problematic budget rigidity, while budget fungibility means that earmarks can become political theater, and complicate budget processes, without actually driving improvements in service delivery.<sup>146</sup> These risks are a reminder that earmarking almost certainly should be used cautiously, and with clear justification. This includes an emphasis on ensuring that earmarking is actually translated into increased spending on designated activities – including, potentially, through specific oversight functions that encourage public monitoring – and on using earmarks to support broad public benefits rather than narrow benefits to elite groups.

> 142 <mark>Castro, L., & Scartascini, C. (2015). Tax compliance and enforcement in the pampas evidence from a field experiment.</mark> _<mark>Journal of Economic Behavior & Organization</mark>_ <mark>,</mark> _<mark>116</mark>_ <mark>, 65-82; Weigel, J. L. (2018).</mark> _<mark>The taxman cometh: A virtuous cycle of compliance and state legitimacy in the DR Congo</mark>_ <mark>. Working Paper.</mark>

> 143 Bird, R., & Jun, J. (2005). Earmarking in theory and Korean practice. _International Studies Program Working Paper 05-15_ . Atlanta: Andrew Young School of Policy Studies, Georgia State University.

> 144 Prichard, W. (2009). The politics of taxation and implications for accountability in Ghana 1981-2008. _IDS Working Paper 330_ . Brighton: Institute of Development Studies; Flores-Macias, G. (2012). Financing security through elite taxation: The case of Colombia's "Democratic Security Taxes". _Studies in Comparative International Development_ , 49 (4):477-500; Flores-Macias, G. (2016). Building support for taxation in developing countries: Experimental evidence from Mexico. _ICTD Working Paper 51_ . Brighton: International Centre for Tax and Development.

> 145 Prichard, W. (2015). _Taxation, responsiveness and accountability in developing countries: The dynamics of tax bargaining_ . Cambridge: Cambridge University Press; Cashin, C., Sparkes, S., Bloom, D., (2017). Earmarking for health: form theory to practice. _Health Financing Working Paper No.5._

> 146 Bird, R., & Jun, J. (2005). Earmarking in theory and Korean practice. _International Studies Program Working Paper 05-15_ . Atlanta: Andrew Young School of Policy Studies, Georgia State University.

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