Taxes and Bribes in Uganda

Area of Science:

• Economics
• Public Policy
• Supply Chain Management

Background:

• Uganda's charcoal and timber supply chains are significant economic sectors.
• Corruption, including bribery and tax evasion, poses challenges to these industries and governance.
• Understanding the dynamics of financial transactions between supply chain actors and government officials is crucial.

Purpose of the Study:

• To investigate patterns of bribe and tax payments within Uganda's charcoal and timber supply chains.
• To identify factors influencing the presence and magnitude of these payments.
• To analyze the relationship between tax collection and bribery in the charcoal market.

Main Methods:

• Utilized data from 433 firms across Uganda's charcoal and timber supply chains.
• Employed bivariate probit and Tobit regression models to analyze payment data.
• Examined the influence of factors such as queuing, capital-at-risk, favoritism, networks, and supply chain roles.

Main Results:

• Empirical support found for hypotheses related to queuing, capital-at-risk, favoritism, networks, and supply chain roles in influencing payments.
• Evidence suggests that tax collection and bribery are positively correlated in the charcoal market (taxes crowd-in bribery).
• Specific factors significantly predict the likelihood and amount of bribe and tax payments.

Conclusions:

• The study provides critical insights into the complex interplay of corruption and taxation in informal economies.
• Findings underscore the importance of considering behavioral and structural factors in supply chains when addressing corruption.
• Policy interventions should account for these dynamics to improve tax collection and reduce bribery in Uganda's natural resource sectors.