The areas of Uganda that had pre-colonial centralisation are strongly correlated with a higher willingness to pay taxes in today’s Uganda. There are three mechanisms which account for this phenomenon.
The first mechanism is the difference in citizens’ beliefs about the need to obey authority. In pre-colonial times, states in centralised polities had the means to enforce authority and uniformly apply policies to extract labour, enforce laws, and collect taxes across their territories. The legacy of such a system of governance may have led people in these regions to become more obedient to authority, which in turn may shape their compliance to paying taxes.
The second mechanism is the quality of institutions. Political structures in pre-colonial centralised societies helped promote the accountability of local leaders by distributing power, influence, and authority among numerous hierarchies of institutions. The legacy of indigenous bureaucratic capacity that promotes accountability can in turn affect trust in the contemporary fiscal contract between citizens and local government.
The third mechanism centres on social cohesion. Pre-colonial centralised states in Africa expanded their territories by conquering new areas. The expanding kingdoms in pre-colonial times needed to bring together individuals with different backgrounds and encourage their acknowledgment of authority and compliance. To do so they strengthened social cohesion among the different groups by using proto-nationalistic beliefs, religion, and political rituals. This helped build a cohesive polity, where people from various backgrounds felt a sense of belonging and shared identity. A strong social cohesion in pre-colonial centralised areas is likely to have contributed to a higher interpersonal trust, which may further explain the higher tax compliance norms in these areas.
The higher tax compliance norms in historically centralised parts of Uganda are due to the legacy of the state’s capacity to uphold authority and the strong social cohesion through higher interpersonal trust. Better quality public institutions do not play a significant role in explaining the higher tax compliance norms in historically centralised areas. Even if public institutions are not trusted, the presence of strong interpersonal trust within the community can offset this and encourage tax compliance.
The interplay between historical governance structures, societal norms, and contemporary tax compliance behaviour is extremely complex. It is important, therefore, to understand the long-lasting effects of historical legacies when designing effective tax policies and compliance strategies.
Though Uganda offers unique experiences, the empirical patterns may have broader implications for other countries in Africa with centralised pre-colonial systems.
This blog is based on the article Pre-colonial centralization and tax compliance norms in contemporary Uganda. Journal of Institutional Economics. Vol. 19(3): 379-400.
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