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Opportunities and Challenges for Enhancing Tax Capacity: Evidence from Indonesia and Pakistan

February 8, 2024

Tax reforms often focus on tax rates and the tax code, but in many low- and middle-income countries, how countries actually administer tax collection may be equally if not more important. In this event, we discuss a series of studies from both Indonesia and Pakistan that study these themes, including the large-scale introduction of scale-scale 'medium corporate tax offices' in Indonesia, performance pay for tax collectors in Pakistan, and leveraging bureaucratic reassignment to encourage tax collection in Pakistan. We also discuss the designs of ongoing randomized trials aimed at understanding the role of tax staff and supporting budgets in Indonesia, and a project improving tax-benefit linkages in Pakistan aimed at rebuilding the social compact between citizens and the state.

This event is part of the Governance Research Seminar Series, and it features a Presentation on Tax Capacity by Benjamin Olken. Olken is the Jane Berkowitz Carlton and Dennis William Carlton Professor of Microeconomics at MIT. His research focuses on development economics, with a particular interest in improving the performance of the public sector in developing countries, including social protection programs, taxation, and quality of governance, and on environmental challenges in developing countries. He is a faculty Director of J-PAL, the Abdul Latif Jameel Poverty Action Lab at MIT, Co-Scientific Director of J-PAL's Southeast Asia office, and Co-Chair of the J-PAL's Social Protection Initiative. He is Editor of American Economic Journal: Applied Economics, and co-Director the National Bureau of Economic Research (NBER) Development Economics Program.