Tax administration and compliance: evidence from medieval Paris
By Al Slivinski and Nathan Sussman
Published Online (2012)
Introduction: The problem of tax compliance is as old as is the levying of taxes. While there has been a great deal of research on tax compliance since the publication of Allingham and Sandmo’s seminal 1972 paper, two recent surveys of the field have both concluded that our understanding of the factors that influence tax compliance is still minimal. Inducing compliance from taxpayers is important to governments for many reasons. Non-compliance obviously reduces the revenue raised from any tax system, but in addition, noncompliance can undermine the legitimacy of the government, and non-compliance that is unevenly distributed across social classes, professions or income levels can lead to social unrest if not violence. Consequently, governments expend considerable resources on reducing tax evasion, and innovations in tax administration that induce high compliance rates at reasonable cost are extremely important.
This paper analyzes a particular tax-collection mechanism that was used in medieval Paris to finance wars and other activities carried out by the French crown. The information we uncover regarding its implementation, as well as results from a theoretical model, indicate that this mechanism – known as the tailles – was able to collect the revenues the crown desired at low cost and with high levels of compliance, despite the minimal bureaucratic machinery available to the French king for collecting taxes. In one sense, the primary difficulty in collecting taxes has remained constant throughout history. Citizens have superior information about the base on which most taxes are collected, particularly their own income and wealth. In medieval times and for long afterward, this led governments to rely on taxes levied on easily observed transactions.
In the case of medieval Paris, this implied taxing goods that entered and left the city walls. However, such indirect taxes have many undesirable features; they are in particular generally regressive, which can be a trigger for social unrest. While direct taxes on personal income and wealth can avoid these difficulties, they are harder to collect because of the asymmetric information problem mentioned. Medieval kings had relatively modest administrative capabilities, and there were, of course, none of the third-party record-keeping and reporting mechanisms in place that modern governments use. Moreover, attempts by the crown to send royal tax collectors (and sometimes troops) into cities to collect taxes ran the risk of igniting riots.