Title: When Should a Tax Be Quid Pro Quo? Local Government Revenue, Service Delivery Failure, and Tax Resistance in Uganda
Authors: Dr. Arinaitwe Julius, Dr. Twinomujuni Rosebell, Dr. Mategeko Betty
Volume: 10
Issue: 5
Pages: 132-140
Publication Date: 2026/05/28
Abstract:
This study examined the relationship between local government tax compliance, service delivery performance, and tax resistance in Uganda over the period 2000-2023. Grounded in the quid pro quo theory of taxation - which posits that taxpayers are more likely to comply when they perceive tangible returns for their tax contributions - the study investigated how failures in public service delivery by local governments fuel widespread tax resistance among Ugandan citizens. Using a mixed-methods design anchored in quantitative time series analysis, including Autoregressive Distributed Lag (ARDL) bounds testing, Vector Error Correction Modelling (VECM), Granger causality testing, and panel data regression, the study analysed secondary data drawn from the Uganda Revenue Authority, Ministry of Finance Planning and Economic Development, Uganda Bureau of Statistics, and the World Bank. Results revealed a statistically significant negative relationship between service delivery failure indices and local tax compliance rates (? = ?0.67, p < 0.01), confirming that deteriorating public services systematically eroded citizens' willingness to pay taxes. The VECM results showed a long-run equilibrium correction coefficient of ?0.43 (p < 0.001), indicating that approximately 43% of deviations from the long-run tax compliance equilibrium were corrected each year. Granger causality tests established bi-directional causality between service delivery failures and tax non-compliance, while impulse response analysis showed that a one standard deviation shock to service failure metrics produced a sustained decline in compliance rates lasting over four years. Panel regression results further confirmed that districts with the lowest service delivery scores recorded compliance rates up to 38 percentage points below the national average. These findings underscored the urgent need for Uganda's local governments to adopt performance-linked revenue frameworks, strengthen public financial accountability mechanisms, and reorient tax administration around visible service delivery outcomes as a precondition for rebuilding taxpayer trust and improving revenue mobilisation.