Publication: Applying Behavioral Insights to Improve Tax Collection: Experimental Evidence from Poland
Loading...
Date
2017-06-01
ISSN
Published
2017-06-01
Author(s)
Editor(s)
Abstract
Mobilizing domestic revenues efficiently is a priority for the Government of Poland, but it is not easy. There are numerous instruments that can be used to achieve this objective. Traditional measures to boost government revenues include changes to the tax legislation and reforms in the area of tax administration. Such measures can have a large fiscal impact, but are often politically challenging to design and negotiate, and can take time to implement. Behavioral interventions often focus on adapting existing systems and processes and can thus be implemented relatively quickly and at a low cost. Overall, they are an additional tool in the policy toolkit that country authorities have to improve tax compliance, and thus complement but do not substitute traditional measures to establish effective tax collection systems including changes in tax legislations and tax administration reforms. Behavioral interventions can also help the Tax Authority to align its strategy more accurately to taxpayer behavior. The Polish authorities were interested in applying insights from behavioral economics to their communications with taxpayers to see if making small changes could promote tax compliance. This paper summarizes the results of a randomized controlled trial (RCT) that used letters to remind taxpayers in Poland to pay their taxes. These taxpayers had declared their personal income tax (PIT) for the 2015 fiscal year but had failed to pay what they owed by the deadline, April 30, 2016 (i.e., taxpayers in arrears). The trial took place between May and August 2016 and covered a total of 149,925 individual taxpayers.
Link to Data Set
Citation
“Jamison, Julian; Hernandez, Marco; Korczyc, Ewa; Mazar, Nina; Sormani, Roberto. 2017. Applying Behavioral Insights to Improve Tax Collection: Experimental Evidence from Poland. © World Bank. http://hdl.handle.net/10986/27528 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Promoting Tax Compliance in Kosovo with Behavioral Insights(World Bank, Washington, DC, 2019-03-01)As in many countries, tax collection is a development challenge in Kosovo. Kosovo is one of the poorest and youngest countries in Europe in terms of gross domestic product (GDP) per capita and both demographics and statehood. The lack of an independent monetary policy — given that Kosovo has adopted the euro as the national currency — means that ensuring the sustainability of fiscal policy is critical. However, limited tax revenues hamper the government's ability to address economic cycles. Between 2011 and 2017, total government revenue amounted to about 14 percent of GDP, below the average of 19 percent among countries in Europe and Central Asia. Unlike other countries, Kosovar government relies on taxes for more than 85 percent of its revenues. Mobilizing tax revenues is therefore critical. The Tax Administration of Kosovo (TAK) requested assistance from the World Bank and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) to address this challenge using an evidence-based approach. To this end, the World Bank and GIZ applied behavioral insights to promote tax compliance among specific groups of taxpayers. Three experiments were designed, implemented, and evaluated in 2018 that involved sending behaviorally informed reminders using letters, e-mails, and short messaging service (SMS) messages to various groups of taxpayers to induce timely and honest declarations and payments. The short-term objective of these trials was to increase the number and timeliness of tax declarations. Simple, behaviorally designed messages were effective in inducing tax declaration. Messages helped raise the tax declaration rate by an average of around 3 percentage points during a period of between four and six weeks. Among personal income tax (PIT) declarations, this represents a 59 percent increase in compliance, equivalent to over 200 more annual tax declarations among participants. The likelihood of payment rose in many instances, and no significant difference was found in the amounts of taxes paid. Lessons from the tax experiments in Kosovo highlight the benefits of rigorous impact evaluation and the need to establish processes that help integrate tax collection functions and data systems.Publication Behavioral Interventions in Tax Compliance(World Bank, Washington, DC, 2016-06)This paper presents results from a large (43,387) nationwide randomized controlled trial in Guatemala that used reminders to promote tax compliance. The trial varied the letter received by taxpayers (individuals and firms) who had failed to pay their income tax for the 2013 tax year. Taxpayers were randomly allocated to receive either no letter, the letter originally used by the Guatemalan Tax Authority, or four letter variants adapted using behavioral design. The study finds that although all letters increased the rate of declaration, only two of the letters were successful at increasing the rate of payment and the average amount paid per letter received. The best performing treatments were a deterrent message framing non-declaration as an intentional and deliberate choice, rather than oversight (designed to overcome status quo bias), and a social norms message that referred to the 64.5 percent of taxpayers that had already paid this tax (join the status quo). These two interventions increased the rate of payment as well as the average amount paid conditional on paying, overall more than tripling tax receipts. The paper estimates that if sent to all taxpayers in the sample, in 11 weeks the social norms letter would have generated additional tax revenues of approximately US$760,000, which is 36 times the cost of sending the letters. The effects are persistent and remain at 12 month follow up, suggesting the letters are effective in increasing revenue for the tax authority rather than just bringing tax receipts forward.Publication Group-Based Cognitive Behavioral Therapy Training Improves Mental Health of SME Entrepreneurs(World Bank, Washington, DC, 2019-06)Mental health, well-being, and lasting economic outcomes are intimately connected. However, in geographies marked by fragility, conflict, and violence (FCV), entrepreneurs of small and medium size enterprises (SMEs) experience chronic stress and poor mental health on a regular basis. These issues can hamper performance and quality of life for the entrepreneurs, and can dampen the benefits of existing financial and business assistance programs. Few proven rigorous interventions are known. This study tests the hypothesis that a five-week group Cognitive Behavioral Therapy (CBT) training called Problem Management Plus for Entrepreneurs (PM+E), in combination with financial assistance, could be more effective at reducing psychological stressors of SME entrepreneurs in FCV contexts than financial assistance alone. Meaningful and statistically significant improvements in mental health were achieved, with improvements persisting and increasing beyond the immediate post-intervention period. Based on analysis of pooled data across two follow-up rounds (at five weeks and three months post-intervention), entrepreneurs in the treatment group experienced statistically significant reduction in the intensity and prevalence of depression and anxiety symptoms (measured by the Patient Health Questionnaire Anxiety and Depression Scale) and higher levels of well-being (measured by the World Health Organization Well-Being Index) compared with the control group. The effect was marked for those experiencing mild/moderate levels of depression and anxiety, suggesting the clinical value of such low touch interventions. Overall, the study demonstrates that empirical research through Randomized Control Trials (RCTs) can be conducted in challenging, FCV settings through appropriate rapid training of local researchers and non-specialist providers (NSPs) at a low cost, yielding scalable programmatic and policy level lessons.Publication Motivating Bureaucrats through Social Recognition(World Bank, Washington, DC, 2018-06)Bureaucratic performance is a crucial determinant of economic growth. Little is known about how to improve it in resource-constrained settings. This study describes a field trial of a social recognition intervention to improve record keeping in clinics in two Nigerian states, replicating the intervention -- implemented by a single organization -- on bureaucrats performing identical tasks in both states. Social recognition improved performance in one state but had no effect in the other, highlighting both the potential and the limitations of behavioral interventions. Differences in observables did not explain cross-state differences in impacts, however, illustrating the limitations of observable-based approaches to external validity.Publication Behavioral Aspects of Healthy Longevity(World Bank, Washington, DC, 2023-03)Addressing the growing burden of noncommunicable diseases to achieve healthy longevity for an aging population has become central to global health policy goals. New policy tools are needed for effectively and efficiently tackling health and lifestyle behaviors and habits linked to the development of noncommunicable disease risk factors. Behavioral science offers insights into psychological barriers, mental models, biases, and other factors that influence decision making and habit formation. Applying these insights can support current policy efforts toward healthy longevity. This paper develops a framework to clarify the relationships between noncommunicable disease formation, detection, and management and behavioral determinants at the individual, community, and health system levels. Following the framework, the paper documents frequently identified behavioral barriers at the three key stages of patients’ noncommunicable disease trajectories. It identifies policy lessons from the behavioral science literature to address such barriers and, together with other policies, reduce the incidence of noncommunicable diseases and improve treatment effectiveness.
Users also downloaded
Showing related downloaded files
Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.Publication Lebanon Economic Monitor, Fall 2022(Washington, DC, 2022-11)The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banks’ shareholders) that protects small depositors.Publication The Journey Ahead(Washington, DC: World Bank, 2024-10-31)The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECA’s demographic and socioeconomic disparities. Yet, migration’s full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migration— forced displacement as well as high-skilled and low-skilled economic migration—and from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.