The $100 Million Nudge: Increasing Tax Compliance of Firms Using a Natural Field Experiment

61 Pages Posted: 17 Jan 2022

See all articles by Justin Holz

Justin Holz

University of Chicago, Harris School of Public Policy, Students; University of Chicago

John A. List

University of Chicago - Department of Economics

Alejandro Zentner

The University of Texas at Dallas - Naveen Jindal School of Management

Marvin Cardoza

Independent

Joaquin Zentner

Inter-American Development Bank (IDB)

Abstract

This paper uses a large-scale natural field experiment to examine the effectiveness of deterrence nudges on tax compliance in the Dominican Republic. In collaboration with the tax authority, we sent messages to 56,310 firms who collectively paid $800 million in the year before the experiment. We find that increasing the salience of prison sentences or the public disclosure of evasion increases tax revenue by $184 million (0.22% of GDP). Using a unique sample of large firms, we show that the largest firms, who pay 84% of all corporate income taxes, are considerably more responsive to nudges than typically-studied smaller firms.

Keywords: Taxation, Subsidies, and Revenue, Tax Evasion and Avoidance, Micro-Based Behavioral Economics, Fiscal Policies and Behavior of Firms

Suggested Citation

Holz, Justin and Holz, Justin and List, John A. and Zentner, Alejandro and Cardoza, Marvin and Zentner, Joaquin, The $100 Million Nudge: Increasing Tax Compliance of Firms Using a Natural Field Experiment. Available at SSRN: https://ssrn.com/abstract=4010639 or http://dx.doi.org/10.2139/ssrn.4010639

Justin Holz (Contact Author)

University of Chicago, Harris School of Public Policy, Students ( email )

Chicago, IL
United States

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

John A. List

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

Alejandro Zentner

The University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Marvin Cardoza

Independent ( email )

Joaquin Zentner

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

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