Taxation and Social Intermediaries: Experimental Evidence from Lagos, Nigeria

Tax collection is difficult in low-income countries, and bureaucracies exist alongside non-state actors that extract revenue and provide services informally. Might weak states leverage these actors’ strengths to collect taxes, or should they invest in building fiscal capacity on their own? We conducted a field experiment in Lagos, Nigeria that randomly assigned market vendors to tax appeals delivered by state or non-state agents. Contrary to expectations, non-state actors were not effective messengers. Tax appeals delivered by representatives of marketplace associations, an important social intermediary in this context, were ineffective even at higher levels of trust and message credibility. Messages delivered by state agents, however, were sometimes effective in spurring registration and tax payments, especially among ethnic minorities. This study underlines the importance of social intermediaries in shaping the social contract, and it draws attention to the uneven effects of these kinds of institutions within populations.