Informal Local Taxation in Developing Countries

TLDR

Information taxation is defined as the mobilization of resources outside normal tax channels for the provision of public goods and services. The paper applies the concept of informality, successfully used elsewhere, to local taxation in developing countries and reassesses its merits and demerits. A typology of informal taxes is offered that distinguishes between pinch, extortions, requisitions, contributions, gifts, and donations. In the case of Zaire, an order of magnitude of the importance of informal taxation is offered.

Abstract

In this paper an attempt has been made to apply to the area of local taxation in developing countries the concept of ‘informality’ which has been so successfully utilized in other areas. Information taxation is defined as the mobilization of resources outside normal tax channels for the provision of public goods and services. A typology of informal taxes is offered that distinguishes between (1) ‘pinch’, (2) extortions, (3) requisitions, (4) contributions, (5) gifts, and (6) donations. In the case of Zaire, an order of magnitude of the importance of informal taxation is offered. A reassessment of the merit and demerits of informal taxation is then proposed.