Informal taxation in Sierra Leone : Magnitudes, perceptions and implications

Abstract

In low-income countries, citizens often pay ‘taxes’ that differ substantially from what is required by statute. These non-statutory taxes are central to financing both local public goods and maintaining informal governance institutions. This study captures the incidence of informal taxation and taxpayer perspectives onthese payments. It is based on a taxpayer survey, in-depth interviews with government and chiefdom officials, and focus group discussions with community stakeholders across three districts of Sierra Leone. We find, first, that informal taxes are a prevalent reality within areas of weak formal statehoodin Sierra Leone, with households paying an equal number of informal and formal taxes. Second, we find positive taxpayer perceptions of the fairness of informal taxes relative to formal taxes, despite informal taxes beingregressive in theirdistribution. We explain this by the fact that taxpayers are more likely to trust the actor levying these payments, and are more likely to believe that they will be used to deliver benefits to the community.