A large literature examines variations in tax compliance rates, taxpayer motivation, and the representation of citizen demands in public spending. Yet little is known about how these factors interact when taxpayers are taxed by – and demand accountability from – multiple layers of government, such as national and local tax authorities.
In this paper, we assemble a unique dataset linking more than 150,000 firms across national (Uganda Revenue Authority (URA)) and local (Kampala Capital City Authority (KCCA)) tax records in Kampala, Uganda, covering 2018–2023 – a setting characterised by limited vertical coordination and overlapping business taxation. By connecting these tax records, we analyse compliance patterns across tiers and over time. Our results reveal alarmingly high rates of non-compliance.
Among active firms, on average, only 14.4 per cent comply with both authorities, while the majority only pay either URA or KCCA taxes. Even among firms that have historically filed both, only 36.6 per cent sustain joint compliance over time. Regression estimates suggest that compliance with one authority often substitutes for compliance with the other, underscoring how fragmented records and uncoordinated enforcement create loopholes that firms exploit. This leads to substantial revenue losses for both tax agencies, an estimated annual shortfall equal to 102 per cent of KCCA’s trade licence revenue, and around 42 per cent of URA’s business income tax liabilities.
A survey of 1,479 firms complements this picture, pointing to a difficult tax climate marked by widespread dissatisfaction with public services and little agency in how revenue is spent. Together, our findings show that bureaucratic fragmentation is costly – eroding compliance, deepening asymmetries between authorities, and undermining revenue mobilisation in low-income settings.
