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Appealing, threatening or nudging? Assessing various communication strategies to promote tax compliance

Author

Listed:
  • Andris Saulitis

    (Baltic International Centre for Economic Policy Studies)

  • Philipp Chapkovski

    (University of Duisburg-Essen)

Abstract

This study examines the effect of various communication strategies on wage underreporting and tax compliance. Employing a field experiment with 3813 businesses in Latvia—a country marked by substantial wage underreporting—this research utilizes advanced data analytics to disseminate messages from the tax authority to firms whose declared wages substantially lag behind industry and regional averages. Messages ranged from normative appeals to audit probabilities and nudges. The immediate result was a notable increase in compliance in the first four months after the intervention, with firms elevating average wage levels. While the specific content of messages did not result in distinct long-term compliance behavior, the overall effectiveness of sending messages was affirmed. We identify a message combining 5% audit probability with normative appeals as the most effective one in enhancing tax revenues and triggering minimal negative feedback from the message receivers.

Suggested Citation

  • Andris Saulitis & Philipp Chapkovski, 2025. "Appealing, threatening or nudging? Assessing various communication strategies to promote tax compliance," Public Choice, Springer, vol. 203(1), pages 237-275, April.
    • Handle: RePEc:kap:pubcho:v:203:y:2025:i:1:d:10.1007_s11127-024-01194-w
    DOI: 10.1007/s11127-024-01194-w
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    More about this item

    Keywords

    Tax collection; Shadow economy; Prosocial behaviour; Tax audits; Wage underreporting;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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