Nudging for Tax Compliance: A Meta-Analysis

Abstract

Taxpayer nudges-behavioral interventions that aim to increase tax compliance without changing the underlying economic incentives of taxpayers-are used increasingly by governments because of their potential cost-effectiveness in raising tax revenue. We collect about a thousand treatment effect estimates from over 40 randomized controlled trials, and in a meta-analytical framework show that non-deterrence nudges-interventions pointing to elements of individual tax morale-are on average ineffective in curbing tax evasion, while deterrence nudges-interventions emphasizing traditional determinants of compliance such as audit probabilities and penalty rates-are potent catalysts of compliance. These effects are, however, fairly small in magnitude. Deterrence nudges increase the probability of compliance by only 1.5-2.5 percentage points more than non-deterrence nudges, while the effects are likely to be bound to the short-run, and are somewhat inflated by selective reporting of results.

Improving Tax Compliance Without Increasing Revenue: Evidence From Population-Wide Randomized Controlled Trials in Papua New Guinea

“…These findings are consistent with the explanation in our paper, whereby taxpayers facing lower total costs from compliance are the most likely to respond to nudges. Secondly, the finding of similar effects of different types of nudges is consistent with earlier research (Antinyan and Asatryan, 2019;Mascagni, 2018;Slemrod, 2019). For example, in Ethiopia and Rwanda, Shimeles et al (2017) and Mascagni et al (2017) respectively, find that deterrence and non-deterrence messages have similar effects on the likelihood of taxpayers filing a declaration and on the amount of tax paid.…”

“…Studies using nudges have illustrated that tax revenue can be increased through different types of messages that draw on a range of motivations to comply, including the risk of punishment, social norms of compliance, reminders of legal obligations or highlighting the public benefits from paying tax (Hallsworth, 2014;Mascagni, 2018). An extensive number of trials have been conducted testing the impact of these types of nudges in high income countries and in general they show that deterrence nudges are more likely to raise revenue than non-deterrence nudges (Antinyan and Asatryan, 2019;Slemrod, 2019). However, even in these settings far less attention has been given to how the impact of nudges varies between different types of taxpayers (De Neve et al, 2019).…”

“…In these settings, authorities typically have less capacity to enforce tax legislation and attempts to deter taxpayers from being non-compliant by threatening punishment are often not seen as credible (Bergolo et al, 2019;IMF, 2020;Kleven et al, 2018). As a result, governments have begun exploring alternative, non-deterrence approaches to encourage taxpayers to comply, such as by providing them with information that tax revenue funds public goods and services (Antinyan and Asatryan, 2019;Mascagni, 2018). The impacts of these "nudges" are likely to be inversely related to the cost taxpayers face from complying, especially when enforcement is weak as they may believe they can easily avoid being punished for non-compliance (Gordon and Li, 2009).…”

“…Existing research in these settings has been limited by only involving a sample of taxpayers in a capital city or a specific type of non-compliant taxpayers (Mascagni et al, 2017;Shimeles et al, 2017;Kettle et al, 2016). These studies focused on comparing the impact of different kinds of nudges as opposed to the impact of nudges on different types of taxpayers (Antinyan and Asatryan, 2019;Mascagni, 2018).…”

Who’s calling? The effect of phone calls and personal interaction on tax compliance

“…Most of the field experiments to increase tax compliance and reduce delinquencies have focused on the content of the messages sent to taxpayers (Slemrod 2018;Antinyan and Asatryan 2020). Messages that increase the salience of penalties and audits are effective for increasing tax payments with results that are in line with the predictions from the standard deterrence model of tax evasion (Slemrod et al 2001;Kleven et al 2011;Chirico et al 2015;Hallsworth et al 2017;Meiselman 2018;Chirico et al 2019).…”