Nudge-Enablers-at-the-Canada-Revenue
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Transcript Nudge-Enablers-at-the-Canada-Revenue
Nudge enablers at the Canada
Revenue Agency
Nudge workshop
July 22, 2014
Presentation overview
What is nudge?
Nudge application in international tax
administrations
Nudge initiatives at the Canada Revenue Agency
(CRA)
Step-by-step guide to nudge
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What is nudge?
+
PSYCHOLOGY
A policy intervention aimed at changing
economic behaviour
Targets the decision-making environment
A cost-effective way to facilitate voluntary
compliance
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Effective nudge characteristics
Simple information
Easy process
Positive focus
Presents options
• Highlight the ‘best’ option
Uses social norms
Highlights benefits of desired behaviour
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UK government: Social norms
and timely filing
UK
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Australian government: Debt
correspondence
Objective: Appeal to taxpayers’ psychological
drivers to increase and maintain debt compliance
Method: Mailed altered version of previous letter;
updated content and format with nudge
techniques
Results: Increased compliance, decreased noncompliance compared to previous letter
Compliance behaviours compared to control group
8%
6%
6.8%
4.3%
4%
2%
Unpaid
0%
-2%
-4%
-6%
Entered
payment
arrangement
Increased
debt
Paid in part
or in full
-2.6%
-4.2%
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CRA: ‘Get it in Writing’ Campaign
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CRA: Automatic Dialing
Announcing Device (ADAD)
Objective: Increase filing
compliance by reminding
taxpayers of deadlines
Method: Delivered
automated messages to new
payroll and GST/HST
registrants that informed
them of their filing and/or
remitting deadlines
70%
Results: Increased filing
compliance by taxpayers
contacted through ADAD,
compared to those not
contacted
10%
Filing compliance for new payroll
and GST/HST registrants
No ADAD
ADAD
60%
50%
40%
30%
20%
56%
39%
61%
43%
0%
Payroll
GST/HST
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CRA: Tax-Free Savings Account
(TFSA) – approach under development
Objective: Encourage voluntary removal of 2013
TFSA over-contributions and increase future
compliance with TFSA rules
Method: Mail non-compliers altered nudge
versions of previous communication material
Specific nudge techniques used:
•
•
•
•
•
Compliance social norm
Simplified information and rules
Less text
Bullets and short sentences
Less complicated wording
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Nudge Initiative components
Develop
step-by-step
guide to nudge
Recruit
behavioural
scientists
Partner with
academics
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Step-by-step Guide to nudge
1. Determine the appropriateness of nudge
approach
2. Select and test a suitable nudge intervention
3. Measure results and make recommendations
4. Full implementation of nudge intervention
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Step 1: Appropriateness of nudge
Key considerations:
• Objective
• Target population
Examples:
X • Scenario 1: Business owners from a sector
known to be part of the underground economy
significantly underreported their income.
2: Taxpayers late-filed their tax
• Scenario
return for the past 2 years.
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Step 1 continued
When is nudge most likely to increase compliance?
Unsuitable
•
•
•
•
•
The problem stems from:
Strong negative attitudes toward
the CRA or taxation in general
Low risk aversion
Lack of concern with
consequences of getting caught
Perception that cheating on taxes
is ‘not a big deal’
Strong social norm of cheating
taxes in their ‘group’ (e.g.,
business sector, community, etc.)
Suitable
•
•
•
•
•
•
•
The problem stems from:
Genuine error
Misunderstanding the rules
Lack of information
Rationalization (e.g., ‘other people
do it’)
Analysis of associated risks
Lack of attention
Ambivalent feelings toward
taxation/benefits
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Step 2: Select and test nudge
Review literature
Consult the experts
Determine experimental design
Develop nudge materials
Understand project constraints/restrictions
Test effectiveness
• Focus groups, pre-implementation experiment
Ideal
research
design
Feasible
agency
approach
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Step 3: Measure results, make
recommendations
Before full implementation,
measure and validate
selected nudge approach
through sample populations
and experiments
Create business case
Always good practice to use
control groups from target
population, especially when
pretesting is not an option
Form solid evidence base:
Does the nudge approach
have a strong chance of
success?
Expected results:
To what extent will Nudge
work? What is the
expected return on
investment?
Measure effectiveness:
Did the nudge intervention
facilitate the desired
behavioural outcome? By
how much?
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Step 4: Full implementation
Track progress
• Measure success
• Return on investments
After 1 year or 2, go back to step 3
Determine long-term effectiveness
Make recommendations for extension to other
populations
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Benefits of nudge approach to
compliance
Attitudes,
cognitions,
environment,
norms,
decision-making
context
Compliance
More complete picture of compliance issues
Targeted approach for specific populations
Simplifies complex processes/difficult decisions
Promotes positive attitudes toward CRA
Voluntary instead of forced compliance (less intrusive)
Cost effective
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Where do we start?
Timeframe for Results
Start small and prove nudge works
Move to e-services
Change in filing behaviour
Desired result:
Increase direct deposits
Desired result:
Restore regular filing activity
Taxpayer owes money
New tax credit results in high
volume of enquiries
Desired result:
Payment is received
Complexity
Desired result:
Decrease in phone enquiries
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Thank you
[email protected]
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