Tax compliance as a behavioral problem.
Tax compliance is largely a communication and framing problem, not a deterrence problem. Audit threat letters, social norm messages, and simplified filing processes all produce meaningful increases in compliance at low cost. The evidence suggests that most non-compliance is not willful evasion — it is confusion, inertia, or inadequate information.
5
experiments
5
positive results
0
null or negative
3
replicated
Key Findings
01
Letters emphasizing civic norms and social proof ('most people pay their taxes on time') outperform deterrence-focused letters in increasing compliance.
The Dominican Republic tax nudge experiment sent late-filing taxpayers one of several letters: a deterrence threat, a civic duty appeal, a social norm message, or control. The social norm message — 'most taxpayers in your area pay on time' — produced significantly larger compliance increases than the deterrence letter. Indonesia's penalty simplification experiment found that clearer communication about penalties increased compliance more than increased penalty severity. The consistent finding is that compliance responds to norms and information more than to threat.
02
Expanding the EITC substantially reduces poverty while maintaining labor force participation — one of the most effective anti-poverty tools in the US tax code.
Quasi-experimental evaluations of EITC expansions consistently find that the credit increases labor force participation among single mothers, reduces poverty, and improves child outcomes. Studies using state variation in EITC generosity find that a $1,000 increase in the maximum credit increases maternal employment by 7.3 percentage points and reduces poverty rates. The EITC's structure — which phases in with earnings — creates work incentives that most transfer programs lack.
03
Argentina's simplified fiscal exchange program demonstrates that visible local benefit spending increases voluntary tax compliance.
Argentina's fiscal exchange experiment tested whether showing taxpayers that their taxes fund specific local services (schools, hospitals, roads) in their municipality increased compliance. Municipalities where residents received information about local spending funded by their taxes showed higher voluntary compliance. The mechanism is perceived exchange value: people are more willing to pay taxes when they see concrete local benefits.
All Experiments in the Registry
What the Evidence Cannot Yet Tell Us
Does the social norm effect in tax compliance work for high-income taxpayers and corporations, or primarily for small businesses and individuals?
What is the long-run effect of EITC on children's educational attainment and adult earnings — beyond the income effect on the family?
Can pre-populated tax returns ('return-free filing') increase compliance and reduce burden? The US does not do this; most OECD countries do. Evidence from countries that have adopted it is promising but not experimental.
How do property tax compliance rates respond to simplification and norm messaging? Property taxes fund local services but have lower compliance rates than income taxes in many jurisdictions.