Disentangling the Effects of Ethnicity and Social Intermediaries on Informal Sector Tax in Lagos, Nigeria

In this project, we aim to investigate the role ethnicity plays in shaping attitudes toward taxation and the state. In particular, does ethnicity or other vendor-specific attributes attenuate (or reinforce) the effect of improved information on formal tax compliance and pro-tax attitudes? The proposed qualitative research builds upon and is informed by novel findings that emerged from our recently-concluded field experiment among informal sector vendors in Lagos, which investigated whether tax appeals from either the state government or from important social intermediaries were effective in improving vendors’ willingness to pay tax or their actual tax registration behavior. In particular, we found that ethnicity was an especially powerful determinant of the quality of individuals’ interactions within the marketplace and with both state and societal actors. These relationships, in turn, lead to the divergence in receptiveness to tax appeals. More specifically, members of minority groups were far less likely to respond to information about tax registration and to messages encouraging citizens to pay taxes. Receiving these messages even eroded tax morale and pro-tax attitudes among vendors who are members of the out-group (i.e., non-Yoruba vendors). Out-group recipients of some messages became more skeptical about access to the benefits from tax compliance and lessened perception of being punished for non-compliance. For members of minority groups, messages from the state do more harm than good in terms of tax registration when vendors trust socially embedded organizations or “social intermediaries” (e.g., marketplace associations) more than they do the state.