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Effects of targeted border taxes on formalization and tax compliance in Zambia

Author

Listed:
  • Kwabena Adu-Ababio
  • Maria Jouste
  • Karri Vuoristo
  • Mutemwa Mebelo
  • Juliet Musalale

Abstract

A large informal sector creates hard-to-tax firms. However, such firms, due to their imports, are observed by the tax authority. Using an institutionalized policy that seeks to regularize non-compliant and inconsistent filing firms through a bespoke border tax in Zambia, we examine the effects of the advance income tax (AIT) on firm registration and tax compliance. Our identification strategy relies on difference-in-differences designs to causally estimate these effects across the rate hike, discontinuation, and reinstatement phases of the AIT policy.

Suggested Citation

  • Kwabena Adu-Ababio & Maria Jouste & Karri Vuoristo & Mutemwa Mebelo & Juliet Musalale, 2026. "Effects of targeted border taxes on formalization and tax compliance in Zambia," WIDER Working Paper Series wp-2026-78, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2026-78
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