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Abstract Tax penalty collection remains a significant problem that tax authorities must mitigate around the globe. Failure to identify and mitigate the tax penalty collection problem would result in revenue losses, higher operational costs due to additional steps that must be performed, and higher safety risks because of the escalation of the collection process. Significant strands of behavioural economics exploring tax compliance behaviour generally focus on regular payment and reporting accuracy and timeliness. However, delinquent taxes and penalty repayment and collection have been understudied. This research aims to fill the gap by conducting a field experiment using various behavioural messages to motivate taxpayers that have been issued tax penalties to pay their tax penalties promptly, especially in Indonesia as a developing country. A randomised controlled trial with three treatment arms consists of deterrence, information, and simplification messages will be performed in cooperation with the Indonesian tax authority, the Directorate General of Taxes of the Republic of Indonesia. This research will involve taxpayers registered at the district tax offices within four regional tax offices as possible. The research results are expected to provide meaningful insight for the tax authority in formulating their tax collection policy. Tax penalty collection remains a significant problem that tax authorities must mitigate around the globe. Failure to identify and mitigate the tax penalty collection problem would result in revenue losses, higher operational costs due to additional steps that must be performed, and higher safety risks because of the escalation of the collection process. Significant strands of behavioural economics exploring tax compliance behaviour generally focus on regular payment and reporting accuracy and timeliness. However, delinquent taxes and penalty repayment and collection have been understudied. This research aims to fill the gap by conducting a field experiment using various behavioural messages to motivate taxpayers that have been issued tax penalties to pay their tax penalties promptly, especially in Indonesia as a developing country. A randomised controlled trial with three treatment arms consists of deterrence, information, and simplification messages will be performed in cooperation with the Indonesian tax authority, the Directorate General of Taxes of the Republic of Indonesia. This research will involve taxpayers registered at the district tax offices within four regional tax offices as possible. The research results are expected to provide meaningful insight for the tax authority in formulating their tax collection policy.
Last Published September 28, 2021 02:14 PM October 05, 2021 11:05 AM
Intervention (Public) A physical letter will be sent as an attachment to the standard notice of tax penalties sent to taxpayer. There will be treatment groups receiving three types of intervention letter. 1. Deterrence letter: highlighting the legal and financial consequences of not paying the penalty promptly. 2. Simplification letter: providing biller code to pay the penalty. 3. Information: emphasising on what the taxpayer could do in case the taxpayer has financial difficulties. A physical letter will be attached to the standard notice of tax penalties sent to taxpayer. There will be three treatment groups receiving three different types of intervention letter. 1. Deterrence letter: highlighting the legal and financial consequences of not paying the penalty promptly. 2. Simplification letter: providing biller code to pay the penalty. 3. Information: emphasising on what the taxpayer could do in case the taxpayer has financial difficulties.
Primary Outcomes (End Points) Binary outcome (0 if the penalty is not paid promptly and 1 if the penalty is paid promptly (within 30 days after the issuing date). Binary outcome: - Fully paid (0 if the penalty is not paid promptly and 1 if the penalty is paid promptly within 30 days after the issuing date). - Taxpayer enquiry (0 if the penalty is left updaied and 1 if the taxpayer enquiring instalment, adjournment, abatement, or abolishment). Continuous outcome: - The amount paid (in IDR)
Experimental Design (Public) The trial will be performed in cooperation with the Indonesian Tax Authority and will cover four regions. In total, the field experiment's sample consists of approximately 9,000 individual taxpayers that will be assigned to control and three treatment groups. Half of the sample will be assigned to control and 1,500 taxpayers will be assigned to each treatment group. The trial will be performed in cooperation with the Indonesian Tax Authority and will cover four regional tax offices (28 district tax offices). In total, the field experiment's sample consists of approximately 9,000 individual taxpayers that will be assigned to control and three treatment groups. Half of the sample (4,500 taxpayers) will be assigned to control and each of the treatment group will be assigned 1,500 taxpayers.
Randomization Method Stratified randomisation by STATA Stratified randomisation will be performed using user written STATA command RANDTREAT (v1.4).
Randomization Unit Individual randomisation Individual (taxpayer) level randomisation will be performed.
Planned Number of Clusters - N/A
Sample size (or number of clusters) by treatment arms - N/A
Additional Keyword(s) Tax penalties Tax penalty, payment
Pi as first author No Yes
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