Sanitation and property tax compliance: Analyzing the social contract in Brazil

This paper investigates the role that sanitation plays in upholding the social contract, whereby citizens pay taxes in exchange for governments providing goods and services. We study the case of Manaus, Brazil, where sewer connections vary considerably across the city and property taxes are calculated in a presumptive manner that does not account for a household’s access to sanitation. We find that households with access to the city sewer system are significantly more likely to pay their property tax, relative to households that only have access to latrines or lack access to improved sanitation entirely. Our evidence is consistent with a role for the social contract in this decision, as households with sewer systems are more likely to have positive attitudes towards the municipal government. • We study the relationship between sanitation and property tax compliance in Manaus, Brazil. • Property tax is calculated by the municipal government using a presumptive formula based on observable physical characteristics of the property. • Tax calculation does not include sanitation type, so households with similar tax bills can vary in having a sewer, latrine, or no sanitation. • Households with sewers are more likely to be compliant with property taxes and have a favorable view of municipal government.