This study questions the ‘stylized fact’ (Olken & Singhal, 2011) that informal taxes are redistributive yet regressive by analyzing the redistributive nature of informal taxes in the education sector in the DRC. Although it has been argued that informal taxes, like other indirect taxes, are regressive since they disproportionately affect low-income families, we
find that informal taxes are progressively distributed in the case of education sector in the DRC, with the 20% richest households paying four-fifths of the total tax burden in the sector.
Although being progressive in the income space, informal taxation cannot be considered ‘fair’ or ‘equitable’ however: the richer households are financing a disproportionally higher part of total education costs, both because children of poorer households drop out of school earlier and because richer households can pay for higher quality schools. The redistributive nature of informal taxes disappears after controlling for both effects.
