What Motivates People to Pay Their Taxes? Evidence from Four Experiments on Tax Compliance

71 Pages Posted: 8 Mar 2022

See all articles by Eric Floyd

Eric Floyd

University of California San Diego

Michael Hallsworth

Imperial College London

John A. List

University of Chicago - Department of Economics

Robert D. Metcalfe

Boston University

Kristian Rotaru

Department of Accounting, Monash Business School

Ivo Vlaev

University of Warwick - Warwick Business School

Date Written: February 2, 2022

Abstract

In this study, we first present a large natural field experiment that tested messages aimed at increasing tax compliance. We find that the main drivers of changes in compliance are messages describing the monitoring and enforcement behavior of the tax collector. A second natural field experiment built on the results of the first experiment to further investigate what kinds of costs resulting from tax collector oversight are salient to taxpayers. Specific time and cognitive incentives did not significantly increase payment rates, whereas stating non-specific costs of inaction did. Additional analyses suggest the increase in compliance is likely due to a 'fill in the blank’ effect in which taxpayers assume the consequence is a fine. Interestingly, specifically stating maximum fine or jailtime consequences have the largest effect in a laboratory setting but only if the consequences are interpreted as realistic. Overall, our study reinforces that tax authorities can use short messages to increase tax compliance; the estimated accelerated revenue from the two field studies amounts to £9.9m.

Keywords: taxation, compliance, behavioral economics, natural field experiment, accounting

JEL Classification: C93, D03, H26

Suggested Citation

Floyd, Eric and Hallsworth, Michael and List, John A. and Metcalfe, Robert D. and Rotaru, Kristian and Vlaev, Ivo, What Motivates People to Pay Their Taxes? Evidence from Four Experiments on Tax Compliance (February 2, 2022). Available at SSRN: https://ssrn.com/abstract=4023806 or http://dx.doi.org/10.2139/ssrn.4023806

Eric Floyd

University of California San Diego ( email )

CA
United States

Michael Hallsworth

Imperial College London ( email )

John A. List

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

Robert D. Metcalfe

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Kristian Rotaru (Contact Author)

Department of Accounting, Monash Business School ( email )

900 Dandenong Rd
Caulfield East, Victoria 3145
Australia
+613-990-34567 (Phone)

Ivo Vlaev

University of Warwick - Warwick Business School ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
112
Abstract Views
393
rank
328,289
PlumX Metrics