Working Paper: CEPR ID: DP13733
Authors: Janemmanuel De Neve; Clement Imbert; Johannes Spinnewijn; Teodora Tsankova; Maarten Luts
Abstract: We study the impact of deterrence, tax morale, and simplifying information on tax compliance. We ran five experiments spanning the tax process which varied the communication of the tax administration with all income taxpayers in Belgium. A consistent picture emerges across experiments: (i) simplifying communication increases compliance, (ii) deterrence messages have an additional positive effect, (iii) invoking tax morale is not effective. Even tax morale messages that improve knowledge and appreciation of public services do not raise compliance. In fact, heterogeneity analysis with causal forests shows that tax morale treatments backfire for most taxpayers. In contrast, simplification has large positive effects on compliance, which diminish over time due to follow-up enforcement. A discontinuity in enforcement intensity, combined with the experimental variation, allows us to compare simplification with standard enforcement measures. Simplification is far more cost-effective, allowing for substantial savings on enforcement costs, and also improves compliance in the next tax cycle.
Keywords: Tax Compliance; Field Experiments; Simplification; Enforcement
JEL Codes: C93; D91; H20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| simplification (C60) | compliance (K40) |
| deterrence (K42) | compliance (K40) |
| tax morale (H26) | compliance (K40) |
| simplification (C60) | tax collection (H26) |
| simplification (C60) | follow-up enforcement effectiveness (K40) |