Ruhr Economic Papers

Ruhr Economic Papers #698

Behavioral Insights and Business Taxation: Evidence from Two Randomized Controlled Trials

by Nicholas Biddle, Katja Fels and Mathias Sinning

RUB, RWI, 06/2017, 43 S./p., 8 Euro, ISBN 978-3-86788-812-7 DOI: 10.4419/86788812

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Abstract

This paper presents the findings of two Randomized Controlled Trials (RCTs) that were conducted in collaboration with the Australian Taxation Office (ATO). The first trial tests the effect of changes to letters (timing, social norms, color, and provision of information about charitable donations) on response rates of businesses, the timing of payments and the amount of tax debt payments. The second trial consists of two parts. The first part aims to raise awareness of the relevance of tax debt payment by changing internal guidelines used by field auditors. The second part focuses on studying the effect of changing the phone script used by desk auditors to offer assistance with payment arrangements and simplifying a follow-up letter. The findings of the first trial indicate that none of the treatments had a significant effect on any of the outcome measures considered. In contrast, the results of the second trial indicate that changing the phone script of desk auditors and simplifying the follow-up letter reduced the proportion of default assessments raised by the ATO significantly, suggesting that businesses are responsive to certain types of nudges.

JEL-Classification: C93, H25, H26

Keywords: Tax compliance; business taxation; behavioral insights; nudging

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