Behavioral Interventions in Tax Compliance: Evidence from Guatemala

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

doi:10.1596/1813-9450-7690

Cited by 75 publications

(93 citation statements)

References 37 publications

(38 reference statements)

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“…For rms covered by third-party information, the eects of emails that listed specic examples of information known to the tax authority were generally higher. All treatment eects estimated here equal or exceed those from other communication experiments (Castro and Scartascini 2015;Del Carpio 2014;Fellner, Sausgruber, and Traxler 2013;Kettle et al 2016), which suggests that combining dierent messages contents that have proved to be impactful individually (deterrence, 27 Note that we consider payments made by the taxpayer with her annual declaration, and ignore the quarterly advance payments during the year. If a taxpayer is a non-ler and also has outstanding advance payments, those would have to be made with the annual declaration, and are thus considered in our estimation.…”

Section: Income Tax Compliancementioning

confidence: 64%

“…As expected, the observed treatment eect of our emails is substantially larger than treatment eects in most other studies. Besides, our study is one of few in this literature to focus on rms, including corporations, as opposed to individual taxpayers, and the rst with Kettle et al (2016) to focus on tax ling. 11 Indeed, most studies in this literature have focused on correct reporting of liabilities or on the payment of already assessed liabilities, such as property tax liabilities.…”

Section: Policy Research Working Paper 7850mentioning

confidence: 99%

“…It emphasized that not ling taxes is a serious oense, and that oenders could be audited or subject to business closure, as stipulated in the law. Additionally, the message integrated ndings from behavioral design to strengthen the message impact, as studied by Hallsworth et al (2014), BIT (2015), and Kettle et al (2016). The message used shortened and simplied text (with legal details below the main body of the email), featured a clear call to action written in red capital lettersPlease le your income tax return in the next 10 days, provided 19 Given the costs of sending letters as well as their slow and incomplete delivery, the tax authority contacts rms by post only in the context of audits, when a written announcement of the audit is required.…”

Section: Firms Covered By Third-party Informationmentioning

confidence: 99%

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Casting the Tax Net Wider: Experimental Evidence from Costa Rica

Brockmeyer¹,

Hernandez²,

Kettle³

et al. 2016

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All errors are our own.Developing countries struggle to raise sucient tax revenues to fund public services and anti-poverty programs. Indeed, low income countries have signicantly lower tax to GDP ratios than high income countries, despite similar tax rates for major taxes (Gordon and Li 2009;Besley and Persson 2013).A large part of the tax revenue gap can thus be explained by low compliance with statutory tax obligations, one key aspect of which is non-ling. In Costa Rica, about 25% of tax-registered rms, and over 60% of rms that are unregistered but known to the tax authority through third-party reports from other rms do not le their income tax declaration. The numbers are similar in Guatemala, where 28% of registered rms do not le, and across the Latin America region, where the average non-ling rate ranges from 20% to 30%. 1 Similar to other forms of non-compliance, nonling generates costs in terms of lost government revenue, horizontal inequity between taxpayers, and resource misallocation (Skinner and Slemrod 1985;Gordon and Li 2009). Yet, despite its empirical importance, non-ling has received little attention in the literature, which has focused on tax registration of fully informal rms 2 (e.g. De Andrade, Bruhn, and McKenzie 2014) and misreporting among tax lers (e.g. Carrillo, Pomeranz, and Singhal 2016), notably nding these compliance gaps dicult to address. 3 This paper argues that compliance at the tax ling margin can be enhanced with simple and highly cost-eective interventions. We evaluate a nation-wide randomized trial conducted by the tax authority of Costa Rica, in which 49,757 non-ling rms were requested by email to submit their income tax declaration for 2014. 4 To design the strongest possible message, the emails combined three features tested in previous communication interventions aimed at reducing misreporting or payment arrears. Specically, the emails contained strong deterrence content, integrated insights 1 Kettle et al. (2016) for Guatemala. In discussion with the authors, ocials from the Inter-American Center of Tax Administrations reported an average non-ling rate of 20-30% among tax registered rms in the region. A taxpayer is considered a non-ler if it does not le within two months of the ling deadline.2 For the purpose of this paper, rms that are not tax registered are considered fully informal. Firms that comply partially but not fully with their tax ling obligations (e.g. le income tax but not sales tax, or do not le regularly) are considered partially informal.3 Formalizing rms has proven challenging and costly, because the rms' (private) benet of formalization is often lower than the cost of formalization, especially for small rms (McKenzie and Sakho 2010; de Mel, McKenzie, and Woodru 2013; Bruhn and McKenzie 2013). Interventions to reduce misreporting have shown success for the valueadded tax (Pomeranz 2015; Naritomi 2015), but have been less successful for the income tax, where rms can shift evasion from the sales margin to the less veriable cost margin (Carrillo, Pomeranz, an...

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Section: Income Tax Compliancementioning

confidence: 64%

Section: Policy Research Working Paper 7850mentioning

confidence: 99%

Section: Firms Covered By Third-party Informationmentioning

confidence: 99%

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Casting the Tax Net Wider: Experimental Evidence from Costa Rica

Brockmeyer¹,

Hernandez²,

Kettle³

et al. 2016

Self Cite

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“…Field experiments encouraging honest tax reporting, in particular, have a long tradition among economists, psychologists and policy scholars [8,9,10,11,12]. Some have found that the mention of increased audits or penalties has a positive impact on tax compliance, e.g., [13,14,15].…”

Section: Introductionmentioning

confidence: 99%

Failure to CAPTCHA Attention: Null Results from an Honesty Priming Experiment in Guatemala

Kettle

Hernandez²,

Sanders

et al. 2017

Behavioral Sciences

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We report results from a large online randomised tax experiment in Guatemala. The trial involves short messages and choices presented to taxpayers as part of a CAPTCHA pop-up window immediately before they file a tax return, with the aim of priming honest declarations. In total our sample includes 627,242 taxpayers and 3,232,430 tax declarations made over four months. Treatments include: honesty declaration; information about public goods; information about penalties for dishonesty, questions allowing a taxpayer to choose which public good they think tax money should be spent on; or questions allowing a taxpayer to state a view on the penalty for not declaring honestly. We find no impact of any of these treatments on the average amount of tax declared. We discuss potential causes for this null effect and implications for ‘online nudges’ around honesty priming.

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“…Natural logarithm of reported items in the income tax return, namely Sales, previous studies (for instance in the work of Kettle, Hernandez, Ruda, and Sanders, 2016). This outcome variable will be estimated by Probit estimation.…”

Section: Methodsmentioning

confidence: 99%

Beyond Deterrence: An Empirical and Experimental Analysis of Tax Compliance Behaviour in Indonesia

Supriyadi¹

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Behavioral Interventions in Tax Compliance: Evidence from Guatemala

Cited by 75 publications

References 37 publications

Casting the Tax Net Wider: Experimental Evidence from Costa Rica

Casting the Tax Net Wider: Experimental Evidence from Costa Rica

Failure to CAPTCHA Attention: Null Results from an Honesty Priming Experiment in Guatemala

Beyond Deterrence: An Empirical and Experimental Analysis of Tax Compliance Behaviour in Indonesia

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