Applying behavioral insights to tax compliance: Experimental evidence from Latvia

Abstract

In recent years, tax authorities around the world have started using behavioral insights to encourage taxpayers to fulfill their obligations. We review and discuss some of the recent empirical literature on tax compliance. In line with recent trends, we report on a field experiment in collaboration with the tax authority of Latvia (SRS) to encourage previously non-compliant individuals, who also have own business income, to submit their tax declarations on time in 2017. These individuals were pre-emptively sent emails with behaviorally informed messages, in order to reach and influence an important target population, at a salient moment. Our results indicate that all the behaviorally informed messages increased submission by the submission deadline, compared to a control group. The best performer was a message that specifically framed noncompliant behavior as a deliberate choice, which increased timely submission by 9.4% (4.1 percentage points; p=0.05).