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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

Trial Information
General Information
Title
Nudging small-scale self-employed entrepreneurs: The impact of encouraging taxpayers to choose higher tax contribution in the hope of having higher pensions.
RCT ID
AEARCTR-0004527
Initial registration date
October 15, 2019
Last updated
September 28, 2020 8:15 AM EDT
Location(s)
Region
Primary Investigator
Affiliation
Ministry of Finance
Other Primary Investigator(s)
PI Affiliation
Ministry of Finance
Additional Trial Information
Status
Completed
Start date
2019-06-26
End date
2019-10-30
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.4527-2.0.
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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
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?
No
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)
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
Intervention
Is the intervention completed?
No
Is data collection complete?
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
No
Reports, Papers & Other Materials
Relevant Paper(s)
REPORTS & OTHER MATERIALS
Description
Viselkedéstudományi projektek az adóigazgatásban 2019
Citation
Katalin Horváth, Tibor Keresztély, András Svraka, Péter Tóth, Bálint Ván (2020), Ministry of Finance Report