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The Effects of Penalty Information on Tax Compliance: Evidence from a New Zealand Field Experiment

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  • Norman Gemmell
  • Marisa Ratto

Abstract

This paper examines the effects of late payment penalties on tax compliance based on an experiment involving New Zealand goods and service tax (GST) late payers using a late payment model in which the probability of enforcement, rather than detection, is central. A field experiment involving a specific compliance intervention, allows us to examine how taxpayers respond when given different penalty information, examining effects on both taxpayers' stated compliance intentions and subsequently observed behavior. Results suggest that differences in penalty information given to taxpayers and reductions in penalty rates affect compliance stated intentions but actual behavior is generally unresponsive.

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  • Norman Gemmell & Marisa Ratto, 2018. "The Effects of Penalty Information on Tax Compliance: Evidence from a New Zealand Field Experiment," National Tax Journal, National Tax Association;National Tax Journal, vol. 71(3), pages 547-588, September.
    • Handle: RePEc:ntj:journl:v:71:y:2018:i:3:p:547-588
    DOI: 10.17310/ntj.2018.3.05
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    2. Cinzia Castiglioni & Edoardo Lozza & Eric Dijk & Wilco W. Dijk, 2019. "Two sides of the same coin? An investigation of the effects of frames on tax compliance and charitable giving," Palgrave Communications, Palgrave Macmillan, vol. 5(1), pages 1-10, December.
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    4. Juan F. Castro & Daniel Velásquez & Arlette Beltrán & Gustavo Yamada, 2020. "Spillovers and Long Run Effects of Messages on Tax Compliance: Experimental Evidence from Peru," Working Papers 174, Peruvian Economic Association.
    5. Eko Arief Yogama & Daniel J. Gray & Matthew D. Rablen, 2023. "Nudging for Prompt Tax Penalty Payment: Evidence from a Field Experiment in Indonesia," CESifo Working Paper Series 10836, CESifo.
    6. Skov, Peer Ebbesen, 2023. "The effect of late payment penalties on the payment timing of owed taxes," Economics Letters, Elsevier, vol. 229(C).

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