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The direct and indirect effects of messages on tax compliance: Experimental evidence from Peru

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  • Castro, Juan Francisco
  • Velásquez, Daniel
  • Beltrán, Arlette
  • Yamada, Gustavo

Abstract

We carry out a randomized controlled trial to evaluate the effect of three types of messages sent to taxpayers on their compliance with the rental income tax (direct effect) and the spillovers produced on the capital gains and the self-employment income taxes (indirect effects). One message highlights detection, other appeals to social norms, and the third appeals to altruism. We also perform a 15-month follow-up to determine if the treatment increases tax revenues in a sustained manner. We find that the message addressing detection produces a positive and sustained direct effect and a negative spillover on the other two taxes. The “social norms” message has no direct effect but produces a sustained negative spillover on the capital gains tax. The message appealing to altruism produces a transitory negative effect and no statistically significant spillovers. We show there is substantial risk of overestimating the tax revenues produced by the messages if one relies only on their direct effects.

Suggested Citation

  • Castro, Juan Francisco & Velásquez, Daniel & Beltrán, Arlette & Yamada, Gustavo, 2022. "The direct and indirect effects of messages on tax compliance: Experimental evidence from Peru," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 483-518.
    • Handle: RePEc:eee:jeborg:v:203:y:2022:i:c:p:483-518
    DOI: 10.1016/j.jebo.2022.09.022
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    More about this item

    Keywords

    Deterrence; Social norms; Altruism; Tax evasion; Spillovers; RCT; Latin America;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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