Taxation without documentation
Developing countries often lack the official government structure needed to collect taxes efficiently. This lack of systematic tax collection limits the ability of those countries to provide public services that aid growth, such as roads, sanitation and access to water.But a new study co-authored by MIT economist Benjamin Olken reveals that developing countries actually have extensive informal systems in which citizens contribute money and labor to public-works projects. In effect, local governments in the developing world collect more taxes and produce more public goods than many outsiders have realized, a finding with implications for aid groups and governments trying to decide how to fund anti-poverty projects worldwide.“It’s really surprising just how many people are doing this, and how prevalent this is,” says Olken, an associate professor in MIT’s Department of Economics. “This is a very common facet of how people experience life in a lot of developing countries. It’s supporting...