Trying to Make a Good First Impression: A Natural Field Experiment to Engage New Entrants to the Tax System

Sarah Dong and Mathias Sinning ()

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2022, vol. 100, issue C

Abstract: Very little is known about the compliance behavior of first-time taxpayers although their tax paying habits may affect the long-run functioning of a tax system. This paper studies the compliance behavior of new entrants to the tax system using data from a large-scale natural field experiment that was implemented in collaboration with the Australian Taxation Office (ATO). We examine the effectiveness of a welcome letter from the tax authority that aims to nudge first-time taxpayers to lodge their first income tax return. We compare this letter to a standard letter that emphasizes the possibility of penalties and interest charges. We find that both letters have surprisingly similar effects on tax compliance, suggesting that the main channel through which the letters affect individual behavior is by providing information. By contrast, the type of messaging and the way in which information is presented to first-time taxpayers appear to be relatively unimportant. Our analysis of heterogeneous treatment effects indicates that both letters are most effective for young entrants to the tax system and, within this group, more effective for Australian citizens than for visa holders.

Keywords: Tax Compliance; Natural Field Experiment; Behavioral Insights (search for similar items in EconPapers)
JEL-codes: C93 D90 H24 H26 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S221480432200074X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Trying to Make a Good First Impression: A Natural Field Experiment to Engage New Entrants to the Tax System (2021)
Working Paper: Trying to make a good first impression: A natural field experiment to engage new entrants to the tax system (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:100:y:2022:i:c:s221480432200074x

DOI: 10.1016/j.socec.2022.101900

Access Statistics for this article

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics) is currently edited by Pablo Brañas Garza

More articles in Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics) from Elsevier
Bibliographic data for series maintained by Catherine Liu ().