Skip to Main Navigation

Behavioral interventions in tax compliance : evidence from Guatemala (English)

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.

Details

  • Author

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

  • Document Date

    2016/06/01

  • Document Type

    Policy Research Working Paper

  • Report Number

    WPS7690

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Guatemala,

  • Region

    Latin America & Caribbean,

  • Disclosure Date

    2016/06/01

  • Disclosure Status

    Disclosed

  • Doc Name

    Behavioral interventions in tax compliance : evidence from Guatemala

  • Keywords

    average rate of tax;income tax regime;average treatment effect;annual income tax;human development indicator;amount of tax;extra tax revenue;return on investment;gross domestic product;income from capital;information about property;number of declarations;small business owner;event of failure;total government spending;level of compliance;sanctions for noncompliance;mail delivery service;effects of tax;additional fiscal resource;gross national income;tax revenue potential;determinants of growth;collection of tax;Tax Compliance;tax authorities;tax authority;behavioral design;tax return;tax payment;policy tool;government revenue;Tax Evasion;standard error;tax declaration;monetary cost;gross income;point estimate;public revenue;tax receipt;legal entities;cost-benefit analysis;gross revenue;tax type;marginal effect;tax year;descriptive statistic;Public Goods;tax liability;utility function;legal entity;outcome measure;annual return;behavioral science;national pride;basic good;payment amount;tax collection;Industrialized countries;social program;industrialized country;charitable donation;general population;individual level;government administrator;instrumental variable;voter turnout;legal proceeding;tax legislation;sample result;behavioral adaptations;increased revenue;payment behavior;tax records;downward bias;international community;low share;multiple regression;long-term effect;treatment group;central regions;regime choice;business tax;small sample;nontax revenue;shadow economy;accounting standard;accounting standards;tax rate;taxable profit;administrative cost;exempt income;foreign-source income;total tax;sample selection;high tax;functional form;fixed tax;enforcement activity;binary decision;country classification;education expenditure;social inequality;positive impact;development policy;Tax Reform;tax regulation;intrinsic motivation;research partnership;parameter estimate;administrative datum;payment data;tax culture;societal costs;guatemalan quetzal;vat deduction;exchange rate;Exchange Rates;perceived likelihood;pay taxes;economic model;perceived risk;classical model;monetary payoff;voluntary compliance;open access;Property tax;enforcement action;applied studies;public policy;utility maximization;legal basis;

Downloads

COMPLETE REPORT

Official version of document (may contain signatures, etc)

  • Official PDF
  • TXT*
  • Total Downloads** :
  • Download Stats
  • *The text version is uncorrected OCR text and is included solely to benefit users with slow connectivity.

Citation

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

Behavioral interventions in tax compliance : evidence from Guatemala (English). Policy Research working paper,no. WPS 7690,Impact Evaluation series Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/479561467989537366/Behavioral-interventions-in-tax-compliance-evidence-from-Guatemala