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Spillovers and Long Run Effects of Messages on Tax Compliance: Experimental Evidence from Peru

Author

Listed:
  • Juan F. Castro

    (Universidad del Pacífico)

  • Daniel Velásquez

    (University of Michigan)

  • Arlette Beltrán

    (Universidad del Pacífico)

  • Gustavo Yamada

    (Universidad del Pacífico)

Abstract

We carry out a randomized controlled trial to evaluate the effect of three different types of messages sent to taxpayers on their compliance with the rental income tax (direct effect) and the spillovers produced on payments related to the capital gains and the self-employment income taxes. One message highlights detection, other appeals to social norms, and the third type appeals to altruism. This is the first study to evaluate if these messages can produce spillovers across taxes and to perform a long term follow-up. This is important to determine if the treatment increases tax revenues. We find that the message addressing detection produces a positive and permanent direct effect and a negative but transitory spillover on the other two taxes. Overall, it increases tax revenues by US$3.92 per dollar spent in the long run. The message appealing to social norms has no direct effect but produces a permanent negative spillover on the capital gains tax. Ignoring this spillover would have lead one to conclude that this message is innocuous when in fact produces a loss of US$ 5.20 per dollar spent in the long run. The message appealing to altruism produces a transitory negative e ect and no spillovers, and has no effect on tax revenues in the long run.

Suggested Citation

  • 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.
  • Handle: RePEc:apc:wpaper:174
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    More about this item

    Keywords

    Social norms; Altruism; Tax evasion; Randomized controlled trial; Latin America;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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