The Behavioralist As Tax Collector: Using Natural Field Experiments to Enhance Tax Compliance

TLDR: In this article, the authors show that including social norm messages in standard reminder letters increases payment rates for overdue tax and that message referring to public services or financial information also significantly increased payment rates.

About: This article is published in Journal of Public Economics.The article was published on 2017-04-01 and is currently open access. It has received 351 citations till now. The article focuses on the topics: Indirect tax & Tax avoidance.

Figures

Table 3: Impact of the reminder letter on payment rates – Experiment One

Table 8: Logistic regression on paying tax - Experiment Two (marginal effects presented)

Table 2: Date of letter issue by treatment group - Experiment One

Table 10: Logistic and OLS regressions on paying tax and timing of tax payments - Experiment Two

Table 4: Logistic regression on paying tax - Experiment One (marginal effects presented)

Figure 2: Raw data on the cumulative percentage of people paying per day by treatment group for the first 70 days of the study period, Experiment One

Frequently asked questions

Q1. What contributions have the authors mentioned in the paper "The behavioralist as tax collector: using natural field experiments to enhance tax compliance" ?

This paper presents results from two large-scale natural field experiments that tested the effect of social norm messages on tax compliance. Using administrative data from more than 200,000 individuals in the United Kingdom, the authors show that including social norm messages in standard reminder letters increases payment rates for overdue tax. 

Q2. What future works have the authors mentioned in the paper "The behavioralist as tax collector: using natural field experiments to enhance tax compliance" ?

Future research should address the extent to which these moral concerns can influence behavior in other policy areas. 

Q3. What is the main mechanism proposed to affect the moral costs of non-compliance?

The main mechanism proposed is that the actors internalize observed social norms, so that any deviation is accompanied by self-imposed costs such as feelings of guilt (Elster, 1989; Wenzel, 2004). 

Q4. What were the dimensions that produced the specific messages?

Geography and type of debt were identified as two dimensions that produced messages that remained applicable, accurate, and acceptable to recipients, even as specificity increased. 

Q5. Why did the letters have to be delivered to all agents who had not paid their taxes?

It is important to note that, due to administrative policy, letters had to be delivered to all agents who had not paid their taxes (including those in the control group). 

Q6. How long after the letters were issued?

Many of the effects generated by the treatments remained economically meaningful and statistically significant seventy days after the letters were issued. 

Q7. What is the power of the tax authority to enforce payment?

the tax authority has the power to enforce payment by seizing and auctioning goods and assets (Her Majesty’s Revenue and Customs, 2010). 

Q8. Why did the authors use the term minority status in Experiment One?

The authors therefore did so in Experiment Two, in order to assess the specific effect of referring to minority status (“You are currently in the very small minority of people who have not paid us yet”). 

Q9. What are the main advantages of the current study?

Looking at the similar field experiments surveyed by Hallsworth (2014), it appears that the sample size and external validity represent the main advantages of this study; however, other field experiments can draw on richer datasets and have the ability to test a wider range of interventions (for example, different enforcement mechanisms).