Description:
The ability of the state to collect tax revenue is a crucial indicator in the process of economic development, yet how tax compliance develops in low-capacity countries remains poorly understood. I find a 6x the cost marginal rate of return to a simple text-based tax encouragement scheme implemented with the Uganda Revenue Authority. This average effect masks substantial heterogeneity along existing state capacity, measured via a granular, nationwide dataset on governmental services and economic activity. Evidence that the treatment was most effective where state capacity was lowest suggests that digital technology can complement brick-and-mortar capacity, extending the reach of the state