Improving tax compliance without increasing revenue: Evidence from population-wide randomized controlled trials in Papua New Guinea, TTPI Working Paper 7/2020
By Christopher Hoy, Luke McKenzie & Mathias Sinning (ANU Crawford School of Public Policy)
Abstract:
This paper studies the impact of “nudges” on taxpayers with varying tax compliance histories in Papua New Guinea. We present the results from two population-wide randomized controlled trials in a setting that is characterized by low compliance rates and a lack of effective enforcement. We test the impact of text messages, flyers and emails that remind taxpayers of declaration due dates and provide information about the public benefits from paying tax. We find that the treatments increased the number of tax declarations filed without increasing the amount of tax paid because the taxpayers who responded to the nudges were largely exempt from paying tax. This result is consistent across tax types, communication channels and time periods. We also find that the treatments had no impact on previously non-filing taxpayers. Collectively, our results indicate that taxpayers who face the lowest cost from complying are most likely to respond to a nudge.
Reforming state taxes on property, TTPI Working Paper 6/2020
By John Freebairn (University of Melbourne)
Abstract:
Alternative details of tax reform options to replace the current conveyance duty on property transfers, the narrow base land tax, and arguably also stamp duty on property insurance, with an annual property tax in an approximate revenue neutral reform package are described and evaluated. A comprehensive tax base and flat rate replacement land tax offers maximum gains in efficiency and simplicity. But, viewed against the taxes to be replaced it has important tax redistribution effects. Less redistributive options include longer term systems and transition options. Longer term system replacement options include: different taxes for commercial, resident rental, and owner occupied property; improved property rather than land value for the tax base; and a progressive rate rather than a flat rate. Transition adjustment path options include: credit for recent paid conveyance duty; gradual phase down of conveyance duty rate and phase up of replacement property tax. Provision for liquidity constrained owners to carry forward the replacement annual property tax is supported.
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