Risk-Based Compliance Models and Behavioral Insights in Tax Administration: Evidence from East Africa

• Author(s): Caroline Atuhaire ; Carolyne Karungi
• Paper ID: 1710753
• Page: 408-435
• Published Date: 30-06-2019
• Published In: Iconic Research And Engineering Journals
• Publisher: IRE Journals
• e-ISSN: 2456-8880
• Volume/Issue: Volume 2 Issue 12 June-2019

Abstract

This study examines the implementation and effectiveness of risk-based compliance models in tax administration across East African countries, with particular focus on behavioral insights that influence taxpayer compliance. The research investigates how tax authorities in Kenya, Tanzania, Uganda, Rwanda, and Ethiopia have adopted risk assessment frameworks to optimize resource allocation and improve voluntary compliance rates. Through comprehensive analysis of administrative data, policy documents, and behavioral indicators spanning 2010-2018, this study reveals significant variations in compliance model effectiveness across the region. The findings demonstrate that countries implementing comprehensive risk-based approaches, combined with behavioral nudging strategies, achieved compliance improvement rates of 15-23% compared to traditional enforcement methods. Kenya's integrated risk assessment system, incorporating behavioral profiling and predictive analytics, showed the most substantial gains in voluntary compliance, particularly among small and medium enterprises. Tanzania's pilot behavioral intervention program demonstrated that simple communication modifications and social norm messaging increased filing compliance by 18% among targeted taxpayer segments. The study identifies key behavioral factors influencing compliance decisions, including perceived fairness of tax system, trust in government institutions, social norms, and simplicity of tax procedures. Risk-based models that incorporate these behavioral insights prove more effective than purely algorithmic approaches focused solely on audit probability. However, implementation challenges persist across the region, including limited technological infrastructure, insufficient staff training, and resistance to change within traditional tax administration cultures. The research reveals that successful risk-based compliance systems require substantial upfront investment in data systems, analytical capabilities, and behavioral expertise. Countries with stronger institutional frameworks and governance structures demonstrate greater success in sustaining risk-based compliance improvements over time. The study contributes to the growing literature on tax administration modernization in developing countries by providing empirical evidence of behavioral insights' role in compliance model effectiveness. Practical recommendations include graduated implementation strategies, emphasis on taxpayer education and service delivery, integration of behavioral nudges with traditional enforcement tools, and development of locally appropriate risk indicators. The findings have significant implications for tax policy design and administration reform efforts across Sub-Saharan Africa, particularly as countries seek to improve domestic revenue mobilization while maintaining taxpayer trust and voluntary compliance.

Keywords

Risk-Based Compliance, Behavioral Insights, Tax Administration, East Africa, Voluntary Compliance, Taxpayer Behavior, Revenue Mobilization, Developing Countries

Citations

IRE Journals:
Caroline Atuhaire , Carolyne Karungi "Risk-Based Compliance Models and Behavioral Insights in Tax Administration: Evidence from East Africa" Iconic Research And Engineering Journals Volume 2 Issue 12 2019 Page 408-435

IEEE:
Caroline Atuhaire , Carolyne Karungi "Risk-Based Compliance Models and Behavioral Insights in Tax Administration: Evidence from East Africa" Iconic Research And Engineering Journals, 2(12)