Koessler, Torgler, Feld, and Frey (2016) on Promising to Pay Your Taxes

Ann-Kathrin Koessler, Benno Torgler, Lars P. Feld, and Bruno S. Frey, “Commitment to Pay Taxes: A Field Experiment on the Importance of Promise.” Tax and Transfer Policy Institute, Australian National University, Working Paper 10/2016, November 29, 2016 [pdf here].

• A natural field experiment (n≈2000) is conducted in Switzerland (in 2013); the subjects, Swiss taxpayers, do not know that they are taking part in an experiment. 

• The experiment concerns whether it is possible to encourage timely tax payments by having taxpayers voluntarily promise to remit their taxes on time. One potentially confounding factor, however, is that a new “dunning” policy for late taxpayers is enacted concurrently with the experiment. 

• There are two “promise” treatments. In both cases, subjects are told that if they fill in and return a postcard promising to pay their taxes on time, and then do pay their taxes on time, they will be entered into a lottery. The differences between these two treatments is that in one case the lottery prize is cash – 1000 Swiss francs – and in the other, the prize is a wellness spa trip for two, worth approximately 1000 Swiss francs. 

• Both promise treatments have parallel treatments that provide the same lottery to punctual payers, but that do not require or provide the option for the non-binding promise. A control treatment with no lottery or promise completes the collection. 

• Almost one-third of the subjects who are given an opportunity to promise to pay on time make the promise. The willingness to promise is a pretty strong signal both of whether you have paid on time in the past, and of whether you will pay on time this year. 

• Those who were in the spa lottery and who made the promise saw a significant jump in their compliance rates. But the lotteries with promise opportunities do not seem to do any better overall than the lotteries without the promise opportunities. 

• My takeaway, perhaps not as optimistic as that of the authors, is that the “promise” intervention is pretty weak tea.