Nudging small-scale self-employed entrepreneurs: The impact of encouraging taxpayers to choose higher tax contribution in the hope of having higher pensions.

Last registered on September 28, 2020

Pre-Trial

General Information

Title

RCT ID

AEARCTR-0004527

Initial registration date

October 15, 2019

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

October 15, 2019, 9:46 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated

September 28, 2020, 8:15 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country

Hungary

Region

Primary Investigator

Name

András Svraka

Affiliation

Ministry of Finance

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

Tibor Keresztély

PI Affiliation

Ministry of Finance

Contact Investigator

Additional Trial Information

Status

Completed

Start date

2019-06-26

End date

2019-10-30

Keywords

Governance, Welfare

Additional Keywords

Pensions, Taxation

JEL code(s)

H55, H24, D91

Secondary IDs

Abstract

We conducted a large-scale randomized controlled trial among a population of Hungarian self-employed entrepreneurs who are subject to an elective simplified tax regime where they can choose between lower monthly tax payments with lower future social security benefits, and higher payments with higher future benefits. In the trial they received letters describing the differences between these regimes and a short explanation on expected differences in future pensions. Based on the literature and previous BI experiences, we expect that this intervention will increase the probability of choosing for the higher contribution option. We expect that the local average treatment effect will be positive among those who open the letter. The effect of different letter types will be also measured, and the difference between reactions on potential gains and losses will be also quantified.

External Link(s)

Registration Citation

Citation

Keresztély, Tibor and András Svraka. 2020. "Nudging small-scale self-employed entrepreneurs: The impact of encouraging taxpayers to choose higher tax contribution in the hope of having higher pensions.." AEA RCT Registry. September 28. https://doi.org/10.1257/rct.4527-2.1

Sponsors & Partners

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Experimental Details

Interventions

Intervention(s)

Small-scale self-employed entrepreneurs in Hungary can opt for a simplified lump-sum taxation regime called KATA (kisadózók tételes adója) which covers all income taxes and social security obligations payable to the central government for a monthly tax of HUF 50,000 (approx. 170 USD). From the perspective of taxpayers, the main benefits of this regime (beside lower compliance costs) are the significantly lower social security contributions compared to the regular income tax and social security regimes. However, these also result in lower social security benefits, including lower paid medical leave, unemployment insurance, and pensions.

Additionally, KATA taxpayers can also opt for a higher contribution of HUF 75,000 per month (approx. 260 USD) which raises expected pensions at retirement by 10-40%, depending on the age of the taxpayer. Currently this higher bracket is chosen by around 5% of the full time KATA taxpeyers.

In this experiment we sent plain language letters to KATA taxpayers in a randomized controlled trial about the availability of this higher bracket, explaining the details with instructions how to opt for this bracket.

Intervention Start Date

2019-06-26

Intervention End Date

2019-09-30

Primary Outcomes

Primary Outcomes (end points)

Choice of the higher bracket (within 3 months): dummy variable (yes or no)

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

The trial was conducted among 35-54 year old active KATA taxpayers with a working e-government account on the date of the intervention. The control group didn't receive any treatment. The letters were sent to e-government inboxes, where read status can be tracked. The elements of the treatment group were randomly selected.

Experimental Design Details

Letters sent in the trial were picked up by some press outlets and on social media, therefore the control group might be contaminated.

Randomization Method

Reproducible randomization by computer: R 3.6, complete RA using the randomizr package by Coppock (2019)

Randomization Unit

Individuals

Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters

None

Sample size: planned number of observations

Approx. 102,000 individuals

Sample size (or number of clusters) by treatment arms

Uniformly distributed across all treatment and control arms.

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Supporting Documents and Materials

IRB

Institutional Review Boards (IRBs)

IRB Name

IRB Approval Date

IRB Approval Number

Analysis Plan

Analysis Plan Documents

Analysis plan

MD5: 544c86f90ca5f801e5022d2874665e55

SHA1: ec4a800bfeb68037052bc92a09f6987076bb436d

Uploaded At: October 15, 2019

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?

Data Collection Complete

Data Publication

Is public data available?

Program Files

Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials

Description

This report describes the results of sevaral field experiments using randomized controlled trials undertaken in cooperation by the Hungarian National Tax and Customs Office and the Ministry of Finance during 2019. The projects focused on improving tax compliance, and uptake tax incentives using nudges, or information provision.

Citation

Horváth K., Keresztély T., Svraka A., Tóth P., & Ván B. (2020). Viselkedéstudományi projektek az adóigazgatásban 2019 (1; Adópolitikai Műhelytanulmányok). Pénzügyminisztérium. https://ideas.repec.org/p/auo/moftpp/1.html

URL

https://ideas.repec.org/p/auo/moftpp/1.html