Improving taxpayer registration through nudging? Field experimental evidence from Brazil

Simeon Schächtele, Huáscar Eguino and Soraya Roman

World Development, 2022, vol. 154, issue C

Abstract: Deficient taxpayer information is a major impediment for taxation, particularly in developing countries. However, in contrast to the well-established literature on nudging tax compliance, field experimental evidence on low-cost interventions to improve the taxpayer registry is scarce. This paper presents the first evidence on promoting registration in an online tax registry. We randomized outreach communications to over 160 K Brazilian property taxpayers, thereby targeting a tax considered a sleeping giant in Latin America. A simple request to join the registry, embedded in a graphically designed e-mail, substantially increased registration relative to a control treatment. Strikingly, however, adding a lottery reward unintendedly reduced registration in comparison to the simple request. Survey evidence, unavailable in previous studies, points to altered effective motivations to register as an explanation. We highlight one mechanism that can reconcile different results in the literature: rewards may signal voluntariness and lack of enforcement. This is also consistent with the results of our analysis of property tax payments. It suggests that the e-mails increased tax payments of certain taxpayers, but that the lottery treatment lowered payment rates for high-value properties. In sum, nudging may be one element of a successful strategy to improve taxpayer registration. However, while simple low-cost outreach activities improve registration, the use of low-powered incentives can have adverse effects.

Keywords: Tax registry; Field experiment; Incentives; Nudge; Backfiring effect; Property tax (search for similar items in EconPapers)
JEL-codes: C93 D83 D91 H26 K42 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:154:y:2022:i:c:s0305750x22000778

DOI: 10.1016/j.worlddev.2022.105887

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