Abstract
Most tax agencies use letters as the method of communicating with taxpayers. Still, other technologies exist that could be more effective. This paper reports the results of a field experiment conducted by the National Tax Agency of Colombia (DIAN), using phone calls to reduce tax delinquencies. DIAN randomly assigned 34,000 tax debtors to a phone call operation using a fixed script to communicate existing debts and invite taxpayers to a meeting at the local tax agency office. Phone calls were very effective to increase collection of unpaid taxes. Conditional on the phone call being made, the effect on the treatment is about 25 percentage points higher than the control group (about a fivefold increase). We also find suggestive evidence that the personal interaction seems to be an important channel for explaining taxpayers’ behavior. Faced with a tax agent, taxpayers tend to commit to attending the meeting and paying the tax owed. However, many taxpayers who commit do not make payment effective. The findings complement a nascent literature that shows that there are plenty of gains from innovating in the communication strategy. They also indicate that personal interactions are important, but they have to be paired with easy-to-follow and immediate actions. Paying taxes is easier said than done.
Highlights
Tax delinquencies are a major problem for most tax administrations in the world
Mann and Klofstad (2015) show that political-specialized phone banks are more effective than commercial phone banks to mobilize voters. In line with this literature, our study shows that high-quality and personalized phone calls can deliver strong results but in this case in terms of tax compliance
With the objective of increasing tax collection and evaluating the effectiveness of phone calls and personalized interactions with the taxpayer, the National Tax Agency of Colombia (DIAN) agreed in March 2014 to randomly assign the method used to contact a sample of 34,783 taxpayers with due liabilities on the income tax, wealth tax, and value added (VAT) tax, the penalties and interests of those liabilities, and other minor taxes for the period 2009–2014
Summary
Tax delinquencies are a major problem for most tax administrations in the world. According to an estimate by the United States Treasury Department, Americans failed to pay about $110 billion, or around 25 percent of the estimate of the total amount underpaid in 2006 (Perez-Truglia and Troiano 2018). We find that the payment probability declines with the size of debt [as in Perez-Truglia and Troiano (2018), and Gillitzer and Sinning (2018)], differs according to the type of tax [as in Ortega and Scartascini (2020)], and there is a lower effect for firms compared to individuals In this last aspect, phone calls seem to behave more similar to the impersonal methods (letter, email) than to the personal visits (Ortega and Scartascini 2020). The fact that verbal commitments are substantially higher than actual actions provides insights for several strands of literature It cast an additional layer of skepticism on studies that use survey methods to assess the potential effect of deterrence and tax morale interventions.
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