Applying Behavioral Insights to Tax Compliance: Experimental Evidence from Latvia
Keywords:
Tax Compliance, Behavioral Economics, Randomized Field ExperimentsAbstract
In recent years, tax authorities around the world have started to use behavioral insights to encourage taxpayers to fulfill their obligations. We review and discuss some of the recent empirical literature on tax compliance. In line with recent trends, we report on a field experiment in collaboration with the State Revenue Service of Latvia (SRS) to encourage previously non-compliant individuals, who also have their own business income, to submit their tax declarations on time in 2017. These individuals were pre-emptively sent emails with behaviorally informed messages in order to reach and influence an important target population at a salient moment. Our results indicate that all of the behaviorally-informed messages increased submissions by the submission deadline when compared to a control group. The best performer was a message that specifically framed non-compliant behavior as a deliberate choice and increased timely submissions by 9.4% (4.1 percentage points; p=0.05).
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