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Behavioral Interventions in Tax Compliance

Authors: Kettle, Stewart; Hernandez, Marco; Ruda, Simon; Sanders, Michael;

Behavioral Interventions in Tax Compliance

Abstract

This paper presents results from a large (43,387) nationwide randomized controlled trial in Guatemala that used reminders to promote tax compliance. The trial varied the letter received by taxpayers (individuals and firms) who had failed to pay their income tax for the 2013 tax year. Taxpayers were randomly allocated to receive either no letter, the letter originally used by the Guatemalan Tax Authority, or four letter variants adapted using behavioral design. The study finds that although all letters increased the rate of declaration, only two of the letters were successful at increasing the rate of payment and the average amount paid per letter received. The best performing treatments were a deterrent message framing non-declaration as an intentional and deliberate choice, rather than oversight (designed to overcome status quo bias), and a social norms message that referred to the 64.5 percent of taxpayers that had already paid this tax (join the status quo). These two interventions increased the rate of payment as well as the average amount paid conditional on paying, overall more than tripling tax receipts. The paper estimates that if sent to all taxpayers in the sample, in 11 weeks the social norms letter would have generated additional tax revenues of approximately US$760,000, which is 36 times the cost of sending the letters. The effects are persistent and remain at 12 month follow up, suggesting the letters are effective in increasing revenue for the tax authority rather than just bringing tax receipts forward.

Country
United States
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Keywords

COMMUNICATIONS, TAX COMPLIANCE, INVESTMENT, TAX, INVENTORY, DEVELOPING COUNTRY, COMMUNICATION, GROSS DOMESTIC PRODUCT, TAX RECEIPTS, FISCAL MANAGEMENT, INCOME, TAX AUTHORITIES, MIDDLE-INCOME COUNTRY, TAXPAYER, TAX RETURN, WORLD DEVELOPMENT INDICATORS, RETURNS, POVERTY, SHARES, ADDED TAX, GOODS, TAX COLLECTION, ACCOUNTING STANDARDS, 330, TAX AVOIDANCE, TAX DEBT, TAX LIABILITY, INTERNAL REVENUE, DEMOCRACY, TAX REFORM, MARKETS, TAX STRUCTURE, PROFIT, FINANCE, INFORMAL ECONOMY, TAX REVENUE, TAX POLICY, REPUTATION, VALUE ADDED TAX, SMALL BUSINESS, DEBT, TRADE, CORPORATE TAX, FISCAL, TAX RETURNS, GOVERNMENT POLICIES, SUSTAINABLE DEVELOPMENT, PROPERTY, TRUST, COMPETITIVE MARKETS, BUSINESS TAX, RETURN, TAX RATE, ENFORCEMENT, TAXPAYER COMPLIANCE, MONETARY PAYOFF, TAX REGIMES, CREDIBILITY, TAX REGIME, PROPERTY TAXES, TAXPAYERS, EXCHANGE, ACCOUNTING, TAXATION, FINANCES, HUMAN DEVELOPMENT, PUBLIC ECONOMICS, GOVERNMENT REVENUES, INCOME TAX, PROPERTY TAX, DEDUCTIONS, LIABILITY, ASSESSMENT, EXCHANGE RATE, GOOD, REVENUE, TAXES, GOVERNMENT REVENUE, DEFAULT, GOVERNMENT SPENDING, OPTION, PUBLIC POLICY, PROFITS, TAX REVENUES, EXPENDITURES, PUBLIC FINANCE, DEVELOPING COUNTRIES, INTERNATIONAL BANK, TAX LEGISLATION, FUTURE, MIDDLE-INCOME COUNTRIES, MONETARY FUND, DEVELOPMENT BANK, ACCOUNTANT, INTEREST, PUBLIC GOODS, REVENUES, TAX AUDIT, CHECKS, TAX REGULATIONS, AUDIT, TAX EVASION

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
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