Why Presumptive Taxation Fails: Interpretive Evidence from Urban Tanzania

Across Africa, governments adopting presumptive taxation to formalise and expand revenue collection in informal economies. Despite being a “simplified" tax regime, presumptive taxation is often marked by low compliance, significant administrative burdens for tax authorities, and modest revenue yields. I argue that understanding why this is the case requires attention to how presumptive taxation and tax relations in informal economies are interpreted, narrated and practiced on the ground. Drawing on extensive fieldwork with small-scale traders and tax authorities in Dar es Salaam, Tanzania, the paper elucidates three key points of conflict emerging in everyday implementation of presumptive taxation. First, presumptive tax legislation and administrative practice on the ground diverge. Second, traders and state officials hold different interpretations of the publics and spaces that can be legitimately taxed through this system. Third, and relatedly, tax relations between these actors are marred by the highly generalised negative narratives that they hold of one another. Taken together, these findings highlight that presumptive taxation, an ostensibly simplified tax regime, is anything but simple in practice. More broadly, they suggest that contextual meaning making and social relations in informal economies are central to understanding why presumptive taxation may fail on the ground. As such, the paper contributes a novel interpretive perspective to debates on the potentials and pitfalls of taxing informal economies.