Who Pays When Tax Administration Improves? Revenue, Compliance, and Behavioral Responses to Georgia’s Large Taxpayer Office

In 2021, the Republic of Georgia established a Large Taxpayer Office (LTO) to strengthen tax administration and improve compliance among firms that contribute a disproportionate share of revenue. This paper draws on that quasi-experiment to estimate the causal impact of intensive oversight, with no change in tax rates, on taxpayer behavior and revenue collection using administrative data from 2017–2024. Our study exploits both the 2021 introduction of the LTO and the revision of eligibility thresholds in 2024. Estimating a weighted difference-in-differences design, we find that LTO assignment raised annual tax assessments by about 0.4–0.7 percent of GDP, concentrated in VAT and withholding taxes. When we examine the channels, we find that the LTO raised compliance by combining targeted enforcement with improved taxpayer services, while audits became fewer but more selective. The impacts are largest in sectors with strong third-party reporting and high transaction traceability. Our findings underscore that reforms to tax administration can deliver significant gains in fiscal capacity, generate fiscal space, and support development.