This presentation is based on a paper entitled 'Mandating Digital Tax tools as a response to COVID: Evidence from Eswatini' co-authored by Fabrizio Santoro (Research Fellow, ICTD/DIGITAX Programme), Razan Amine (Researcher, DIGITAX Programme, ICTD) and Tanele Magongo (Manager, Strategy, Eswatini Revenue Service [ERS]). View/download the paper: https://bit.ly/3iYKC99 In 2022, the presentation was made at the: 1) 9th Annual Mannheim Taxation Conference, Germany, September 2022: https://buff.ly/3xiJfqp 2) 78th Annual Congress of the International Institute of Public Finance (IIPF), Austria, August 2022: https://bit.ly/3HubKah 3) Working Group in African Political Economy (WGAPE), Rwanda, June 2022 https://bit.ly/3HvX4Yw

1. Mandating digital tax tools as a response to Covid-19:
evidence from Eswatini
Fabrizio Santoro (ICTD), Razan Amine (ICTD), Tanele Magongo
(SRA)
ICTD/SRA
24th May 2022

2. Motivation
Link to WP published recently
Covid-19 pushed tax admins to go digital and reduce in-person
contact (Okunogbe and Santoro 2021) including Eswatini
September 2020: ERS released e-filing mandate: all taxpayers have to
file their taxes online
April 2021: ERS made “zero cash handling” initiative mandatory: cash
is no longer accepted
Benefits of electronic fiscal devices (EFDs), e-registration and
third-party data reporting:
can yield large revenue gains (Eissa and Zeitlin (2014), Ali et al.
(2015) and Mascagni et al. (20210)
but suffers from barriers to uptake
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 1 / 12

3. Research Questions
1 What’s the effect of mandating e-filing on taxpayer filing behaviour?
Are taxpayers remitting more taxes and more accurately?
2 Are there any spillover effects on payment behaviour and payments’
accuracy?
3 What are the heterogeneous impacts of e-Tax on different taxpayers?
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 2 / 12

4. Research Questions
1 What’s the effect of mandating e-filing on taxpayer filing behaviour?
Are taxpayers remitting more taxes and more accurately?
2 Are there any spillover effects on payment behaviour and payments’
accuracy?
3 What are the heterogeneous impacts of e-Tax on different taxpayers?
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 2 / 12

5. Research Questions
1 What’s the effect of mandating e-filing on taxpayer filing behaviour?
Are taxpayers remitting more taxes and more accurately?
2 Are there any spillover effects on payment behaviour and payments’
accuracy?
3 What are the heterogeneous impacts of e-Tax on different taxpayers?
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 2 / 12

6. Context
Tax System
Tax-to-GDP ratio of 14.7%
Two types of taxes: CIT for firms and PIT for individuals
E-Tax, e-filing mandate and zero cash handling
E-Tax platform: taxpayers can (1) file returns (2) access their account
information (3) monitor their filing history (4) log queries
No e-payment module yet but platform shows payment history,
outstanding balance and taxpayers’ filing behavior
Partial take-up of the e-Tax mandate as of June 2021 – only 41% of
registered entities
Cash represent about a third of payments, but digital payments (incl.
MM) have risen in popularity
E-Tax platform – snapshot 1 E-Tax platform – snapshot 2 E-Tax registration 2013-2021
Use of different modes of payments 2013-21
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 3 / 12

7. Context
Tax System
Tax-to-GDP ratio of 14.7%
Two types of taxes: CIT for firms and PIT for individuals
E-Tax, e-filing mandate and zero cash handling
E-Tax platform: taxpayers can (1) file returns (2) access their account
information (3) monitor their filing history (4) log queries
No e-payment module yet but platform shows payment history,
outstanding balance and taxpayers’ filing behavior
Partial take-up of the e-Tax mandate as of June 2021 – only 41% of
registered entities
Cash represent about a third of payments, but digital payments (incl.
MM) have risen in popularity
E-Tax platform – snapshot 1 E-Tax platform – snapshot 2 E-Tax registration 2013-2021
Use of different modes of payments 2013-21
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 3 / 12

8. Context
Tax System
Tax-to-GDP ratio of 14.7%
Two types of taxes: CIT for firms and PIT for individuals
E-Tax, e-filing mandate and zero cash handling
E-Tax platform: taxpayers can (1) file returns (2) access their account
information (3) monitor their filing history (4) log queries
No e-payment module yet but platform shows payment history,
outstanding balance and taxpayers’ filing behavior
Partial take-up of the e-Tax mandate as of June 2021 – only 41% of
registered entities
Cash represent about a third of payments, but digital payments (incl.
MM) have risen in popularity
E-Tax platform – snapshot 1 E-Tax platform – snapshot 2 E-Tax registration 2013-2021
Use of different modes of payments 2013-21
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 3 / 12

9. Context
Tax System
Tax-to-GDP ratio of 14.7%
Two types of taxes: CIT for firms and PIT for individuals
E-Tax, e-filing mandate and zero cash handling
E-Tax platform: taxpayers can (1) file returns (2) access their account
information (3) monitor their filing history (4) log queries
No e-payment module yet but platform shows payment history,
outstanding balance and taxpayers’ filing behavior
Partial take-up of the e-Tax mandate as of June 2021 – only 41% of
registered entities
Cash represent about a third of payments, but digital payments (incl.
MM) have risen in popularity
E-Tax platform – snapshot 1 E-Tax platform – snapshot 2 E-Tax registration 2013-2021
Use of different modes of payments 2013-21
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 3 / 12

10. Data Sources and Description
Combination of taxpayer-level administrative data
Covers all taxpayers in Eswatini, over 2013-2021
Anonymised taxpayer identification numbers (TINs)
Taxpayer registry: above 60,000 taxpayers, 2007-2021, 26 variables
e-Tax registry: indicates “treated” taxpayers, data collected (around
May 2021) 8 months post-mandate, partial take-up (41%)
Returns data: CIT and PIT (101,667 filings) - 2013-2021
Payments data
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 4 / 12

11. Data Sources and Description
Combination of taxpayer-level administrative data
Covers all taxpayers in Eswatini, over 2013-2021
Anonymised taxpayer identification numbers (TINs)
Taxpayer registry: above 60,000 taxpayers, 2007-2021, 26 variables
e-Tax registry: indicates “treated” taxpayers, data collected (around
May 2021) 8 months post-mandate, partial take-up (41%)
Returns data: CIT and PIT (101,667 filings) - 2013-2021
Payments data
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 4 / 12

12. Data Sources and Description
Combination of taxpayer-level administrative data
Covers all taxpayers in Eswatini, over 2013-2021
Anonymised taxpayer identification numbers (TINs)
Taxpayer registry: above 60,000 taxpayers, 2007-2021, 26 variables
e-Tax registry: indicates “treated” taxpayers, data collected (around
May 2021) 8 months post-mandate, partial take-up (41%)
Returns data: CIT and PIT (101,667 filings) - 2013-2021
Payments data
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 4 / 12

13. Data Sources and Description
Combination of taxpayer-level administrative data
Covers all taxpayers in Eswatini, over 2013-2021
Anonymised taxpayer identification numbers (TINs)
Taxpayer registry: above 60,000 taxpayers, 2007-2021, 26 variables
e-Tax registry: indicates “treated” taxpayers, data collected (around
May 2021) 8 months post-mandate, partial take-up (41%)
Returns data: CIT and PIT (101,667 filings) - 2013-2021
Payments data
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 4 / 12

14. Empirical Framework I
We drop all early registrations (6,667 taxpayers) - defined by having
registered voluntarily before the mandate
Early, voluntary registrations are likely to introduce bias in our
estimates.
Control group: all those taxpayers who did not register at all after the
mandate
Treatment group: those who registered only after the mandate, and
not before.
Parallel trends satisfied
Balance test 1 Balance test 2
Parallel trends-filing Parallel trends-payments
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 5 / 12

15. Empirical Framework I
We drop all early registrations (6,667 taxpayers) - defined by having
registered voluntarily before the mandate
Early, voluntary registrations are likely to introduce bias in our
estimates.
Control group: all those taxpayers who did not register at all after the
mandate
Treatment group: those who registered only after the mandate, and
not before.
Parallel trends satisfied
Balance test 1 Balance test 2
Parallel trends-filing Parallel trends-payments
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 5 / 12

16. Empirical Framework II
Yit = β0i + β1i {e − Tax · Post} + β2i {e − Tax} + β3i {Post} + β4i Xi + ϵit
Yit: a set of outcome variables
e − Tax: dummy for whether the taxpayer registered for e-Tax
Post: dummy denoting whether the taxpayer filed after September
2020
e − Tax · Post: interaction term between the e-Tax registration and
Post variable
Xi : time-invariant controls
ϵit: error term
We match the treatment and control groups using Kernel Propensity
Score Matching (PSM), reaching perfect balance
Matching Log Odds- Filing Behavior Matching Log Odds- Payments Behavior
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 6 / 12

17. Main Results- Impact on Filing Behavior
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 7 / 12

18. Main Results- Impact on Payments Behavior
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 8 / 12

19. Mechanisms I
Role of the mode of payment
Digital: credit card and EFTs as “digital”, non-digital: cash and
cheques
Increase in amount paid and probability of making a full payment
(significantly larger for digital-means-payers)
Ease in filing and reporting
Increased on-time filing by 29 pp
Both expenses and deductions increase, hinting that TPs may be filing
more accurately
Estimates on Payment Mode
Estimates on On-Time Filing, Expenses, Deductions
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 9 / 12

20. Mechanisms I
Role of the mode of payment
Digital: credit card and EFTs as “digital”, non-digital: cash and
cheques
Increase in amount paid and probability of making a full payment
(significantly larger for digital-means-payers)
Ease in filing and reporting
Increased on-time filing by 29 pp
Both expenses and deductions increase, hinting that TPs may be filing
more accurately
Estimates on Payment Mode
Estimates on On-Time Filing, Expenses, Deductions
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 9 / 12

21. Mechanisms II
Accuracy in filing and paying
Accuracy of filing: treated taxpayers: 0.81pp more likely to file their
VAT returns conditional on having filed their income tax
No conclusive effects on accuracy of reporting
Accuracy of payment: increased probability of full payment by 16 pp
Heterogeneous impacts
Compared to firms, individual taxpayers are:
less likely to nil-file
more likely to report higher income (2.18 log units of income)
more likely to have higher log taxable income
more likely to on-time file
Mandate is more effective on small taxpayers
Estimates on Accuracy in Filing/ Reporting
Estimates on Full Payments
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 10 / 12

22. Mechanisms II
Accuracy in filing and paying
Accuracy of filing: treated taxpayers: 0.81pp more likely to file their
VAT returns conditional on having filed their income tax
No conclusive effects on accuracy of reporting
Accuracy of payment: increased probability of full payment by 16 pp
Heterogeneous impacts
Compared to firms, individual taxpayers are:
less likely to nil-file
more likely to report higher income (2.18 log units of income)
more likely to have higher log taxable income
more likely to on-time file
Mandate is more effective on small taxpayers
Estimates on Accuracy in Filing/ Reporting
Estimates on Full Payments
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 10 / 12

23. Conclusion
Causal positive impact of mandatory e-filing on tax compliance: filing
and payment behaviour
Five main effects of the mandate:
Reduced the probability of nil-filing and increased reported turnover
Enhanced probability of payment and amount of tax paid (no significant
impact on the tax declared, but increased amount of tax actually paid)
Modest evidence that e-payment plays a role
Improved on-time filings and pushes taxpayers to claim more expenses
and deductions
Bolstered accuracy: positive spillover effect on VAT filings and full
payments made
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 11 / 12

24. Conclusion
Causal positive impact of mandatory e-filing on tax compliance: filing
and payment behaviour
Five main effects of the mandate:
Reduced the probability of nil-filing and increased reported turnover
Enhanced probability of payment and amount of tax paid (no significant
impact on the tax declared, but increased amount of tax actually paid)
Modest evidence that e-payment plays a role
Improved on-time filings and pushes taxpayers to claim more expenses
and deductions
Bolstered accuracy: positive spillover effect on VAT filings and full
payments made
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 11 / 12

25. Policy Recommendations
Incentivizes the Eswatini revenue authority to further promote its
adoption
Only a minority of taxpayers manage to register to E-Tax after the
mandate so ERS could strengthen its facilitation strategy
System to be further improved:
1 not breaking down
2 introducing a more detailed and strict set of checks and validations for
certain groups like large taxpayers
3 integrating an e-payment module
Next steps:
1 use of new data generated by e-Tax and digital payments
2 consequences on data and IT practices within ERS, taking the internal
perspective of the tax administration
3 taxpayer side: collection of survey data to identify practical impacts of
technology on taxpayers
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 12 / 12

26. Thank you
Link to WP published recently

27. Appendix
Outline
1 Appendix
Context
Empirical Framework
Mechanisms
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 1 / 38

28. Appendix Context
E-Tax platform – snapshot 1
Slides
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29. Appendix Context
E-Tax platform – snapshot 2
Slides
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30. Appendix Context
E-Tax registration 2013-2021
Slides
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31. Appendix Context
Use of different modes of payments 2013-21
Slides
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32. Appendix Context
Use of different modes of payments 2013-21
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33. Appendix Context
Governance and country indicators
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34. Appendix Empirical Framework
Correlates with Digital Mode of Payment
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35. Appendix Empirical Framework
Matching Log Odds- Filing Behavior
Slides
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36. Appendix Empirical Framework
Matching Log Odds- Payments Behavior
Slides
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 10 / 38

37. Appendix Empirical Framework
Balance test table between early adopters and those who
register after the mandate
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 11 / 38

38. Appendix Empirical Framework
Balance test table between the control group (never
adopters) and the treatment group (late adopters)
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 12 / 38

39. Appendix Empirical Framework
Parallel trends for the variables “Log Income”, “Log
Taxable Income”, “Log Tax Assessed” respectively
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 13 / 38

40. Appendix Empirical Framework
Parallel trends for the variables “Paid: Yes No” and “Log
Amount Paid”
Slides
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 14 / 38

41. Appendix Empirical Framework
Predictors of E-Tax Registration using a Lasso Logit Model
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 15 / 38

42. Appendix Empirical Framework
Predictors of Digital Mode of Payment using a Lasso Logit
Model
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 16 / 38

43. Appendix Empirical Framework
Propensity score distribution by treatment and control
groups
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 17 / 38

44. Appendix Empirical Framework
Matching Balance for Filing Behavior and Payments
Behavior respectively
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 18 / 38

45. Appendix Empirical Framework
Correlates with E-Tax Registration
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 19 / 38

46. Appendix Mechanisms
DID estimates of E-Tax Policy on Payment Behavior by
Payment Mode
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 20 / 38

47. Appendix Mechanisms
DID estimates of E-Tax Policy on On-Time Filing,
Expenses and Deductions
Slides
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 21 / 38

48. Appendix Mechanisms
DID estimates of E-Tax Policy on Accuracy in Filing and
Reporting
Slides
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 22 / 38

49. Appendix Mechanisms
DID estimates of E-Tax Policy on Full Payments
Slides
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 23 / 38

50. Appendix Mechanisms
DID estimates of E-Tax Policy on Filing Behavior by TP
Type
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 24 / 38

51. Appendix Mechanisms
DID estimates of E-Tax Policy on Filing Behavior by TP
Size
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 25 / 38

52. Appendix Mechanisms
DID estimates of E-Tax Policy on Filing Behavior by
Urban/Rural
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 26 / 38

53. Appendix Mechanisms
DID estimates of E-Tax Policy on Filing Behavior by TIN
Registration Year
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 27 / 38

54. Appendix Mechanisms
DID estimates of E-Tax Policy on Income by Sector
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 28 / 38

55. Appendix Mechanisms
DID estimates of E-Tax Policy on Taxable Income by
Sector
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 29 / 38

56. Appendix Mechanisms
DID estimates of E-Tax Policy on Tax Assessed by Sector
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 30 / 38

57. Appendix Mechanisms
DID estimates of E-Tax Policy on Nil-filing by Sector
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 31 / 38

58. Appendix Mechanisms
DID estimates of E-Tax Policy on Income by Age Group
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 32 / 38

59. Appendix Mechanisms
DID estimates of E-Tax Policy on Taxable Income by Age
Group
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 33 / 38

60. Appendix Mechanisms
DID estimates of E-Tax Policy on Tax Assessed by Age
Group
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 34 / 38

61. Appendix Mechanisms
DID estimates of E-Tax Policy on Nil-Filing by Age Group
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62. Appendix Mechanisms
DID estimates of E-Tax Policy on Payment Behavior by
TP Type
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 36 / 38

63. Appendix Mechanisms
DID estimates of E-Tax Policy on Payment Behavior by
TP Size
F.Santoro,R.Amine,T.Magongo (ICTD/SRA) E-Tax on Compliance 24/05/2022 37 / 38

64. Appendix Mechanisms
DID estimates of E-Tax Policy on Payment Behavior by
Urban/Rural
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