Active Ghosts: Nil-filing in Rwanda

Nil-filing refers to taxpayers reporting zero in all fields of their tax declaration. It is a largely ignored phenomenon in the public finance literature, despite being well known to tax administrators and widespread: half of all registered corporations in Rwanda file nil. This paper sheds light on this issue, using descriptive analysis of administrative data, a randomised controlled trial (RCT), and qualitative interviews with taxpayers and tax officials. We argue that a major reason for nil-filing lies at the intersection between aggressive recruitment campaigns by the Rwanda Revenue Authority (RRA) and taxpayers’ response to a complex and often confusing tax system. Through the lens of nil-filing, we also shed some light on the practical challenges of public administration in low-income countries more generally. By doing this, we challenge the prevailing narrative that governments should always expand the tax base to small and yet unregistered firms, showing some previously undocumented – and unintended – consequences of such a strategy.