Small Businesses Tax Compliance Behaviour: Deterrence, Literacy, or Social Norm? Evidence from RCT in Indonesia

Last registered on May 18, 2022

Pre-Trial

Trial Information

General Information

Title
Small Businesses Tax Compliance Behaviour: Deterrence, Literacy, or Social Norm? Evidence from RCT in Indonesia
RCT ID
AEARCTR-0009460
Initial registration date
May 18, 2022

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
May 18, 2022, 5:16 PM EDT

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

Locations

There are documents in this trial unavailable to the public. Use the button below to request access to this information.

Request Information

Primary Investigator

Affiliation
ANU

Other Primary Investigator(s)

PI Affiliation
ANU
PI Affiliation
ANU

Additional Trial Information

Status
On going
Start date
2021-08-01
End date
2022-07-31
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
This study investigates the compliance behavior of small businesses in Indonesia by utilizing a large-scale natural field experiment conducted in collaboration with the Indonesian tax authority – Directorate General of Taxation (DGT). We analyze the tax compliance effects of three treatment letters focusing on deterrence, literacy and public goods provision messaging. We find that all treatments significantly increase tax filing and payment. Our results indicate that the deterrence letter has the most significant effect on payment. In contrast, the literacy letter triggers the largest increase in filing rates and timely filing but the lowest increase in payment. Our analysis of heterogeneous treatment effects reveals considerable variation in treatment effects across regions, sectors, and annual turnover.

Our study evaluates the effectiveness of deterrence, literacy, and public goods provision messages on tax filing and tax payment as the proxy of tax compliance. We utilize the data from a natural field experiment that has been implemented in collaboration with the Directorate General of Taxation (DGT). The field experiment is conducted on 18 local tax offices under three Regional Tax Offices (RTO), including North Jakarta RTO, South Sumatera and Bangka Belitung RTO, and Nusa Tenggara RTO. The target population consists of approximately 12,000 small businesses – those with annual turnover less than IDR4.8 billion. The target population covers individuals and small firms categorized as zero-filers and late-filers in at least three months during the previous fiscal year.
External Link(s)

Registration Citation

Citation
Dong, Sarah, agung endika and Mathias Sinning. 2022. "Small Businesses Tax Compliance Behaviour: Deterrence, Literacy, or Social Norm? Evidence from RCT in Indonesia ." AEA RCT Registry. May 18. https://doi.org/10.1257/rct.9460
Sponsors & Partners

There are documents in this trial unavailable to the public. Use the button below to request access to this information.

Request Information
Experimental Details

Interventions

Intervention(s)
The field experiment is conducted on 18 local tax offices under three Regional Tax Offices (RTO), including North Jakarta RTO, South Sumatera and Bangka Belitung RTO, and Nusa Tenggara RTO. The target population consists of approximately 12,000 small businesses – those with annual turnover less than IDR4.8 billion. The target population covers individuals and small firms categorized as zero-filers and late-filers in at least three months during the previous fiscal year.
Intervention Start Date
2021-08-01
Intervention End Date
2021-12-31

Primary Outcomes

Primary Outcomes (end points)
Variables related to individual lodgement, reporting and payment behavior are the key outcome
variables.

A list of variables that will be provided by the DGT after the trial registration is attached in
"Docs & Materials" of this registration. The main outcome variables are:
parentheses):
- Binary tax filing improvement indicator
- Tax filing date
- Binary timely tax filing indicator
- Binary inbound communication to tax office indicator
- Binary utilisation of electronic payment
- Log of additional tax payment
- Binary increase of tax payment indicator
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
About 12,000 individuals were randomly assigned to three treatment groups and a control group
(about 3,000 individuals were assigned to each group).
Experimental Design Details
Not available
Randomization Method
A random list of the full population was created by the DGT using simple randomization and assigned to Treatment Group 1, Treatment Group 2, Treatment Group 3 and Control Group.
Randomization Unit
Individual taxpayers
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
about 12.000 taxpayers
Sample size: planned number of observations
about 12.000 taxpayers
Sample size (or number of clusters) by treatment arms
About 3,000 cases in each group (Treatment Group 1, 2, 3 and Control Group).
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials

There are documents in this trial unavailable to the public. Use the button below to request access to this information.

Request Information
IRB

Institutional Review Boards (IRBs)

IRB Name
Australian National University Human Ethics Committee
IRB Approval Date
2021-09-06
IRB Approval Number
2021/508