With thousands of newly confirmed cases and deaths worldwide each day, the novel corona virus and the disease it causes, COVID-19, are impacting every corner of the planet. Using behavioral insights to design simple messages that promote healthy behavior is essential to stop contagion, manage emotions, encourage handwashing, and when the time is right, help people gradually resume normal life. This policy note describes behavioral biases people may be exhibiting during the crisis and offers recommendations for how to overcome them. Most importantly, it offers practical examples for governments, as well as infographics ready for dissemination, that can be used to fight this pandemic.

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Tax compliance can be affected by how taxpayers are informed of their outstanding liabilities. In Colombia, in-person visits from a tax inspector were compared to more impersonal methods such as mailers and emails.Getting a message through any channel had a positive impact on tax compliance,but almost everyone who received a visit from the tax collector made some kind of payment. A spillover effect was found for the payment of other tax obligations by those targeted during the experiment.

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Behavioral insights are becoming part of the policy toolkit in countries around the world, and the IDB has positioned itself at the forefront of this movement in Latin America and the Caribbean. This policy brief discusses some of the reasons behind its success and serves as an encouragement for policymakers in the region to adopt some  of  these tools.  In  a region  with  numerous unfulfilled  needs and  limited resources,  behavioral insights  can  play an  important  role for  improving  public finance  in the  region.  Interventions leveraging  behavioral  insights can  increase revenues  by improving  tax  compliance and boosting  tax  morale. They  can  also improve the  efficiency  of public  spending  by encouraging preventive  healthcare activities  ( involving vaccines,  diet, exercise,  etc.),  promoting energy  and  water conservation, lowering traffic fatalities, and reducing teacher absenteeism, among other means . By surveying the evidence coming from interventions in the field in LAC and other parts of the world, this policy brief makes a strong case to the region to embrace behavioral insights and design behaviorally informed policies. JELclassifications: H0, H20, H26, H3, H51, H52, H54, H55, H83, D91, E71, I18

Keywords: Behavioral  economics,  Behavioral insights,  Public  finance, Public revenue,  Public  spending, Tax  compliance,  Infrastructure,  Health, Agriculture, Education, Retirement, Social security

Sending messages and providing information to individuals tends to affect their behavior (e.g., reduce energy consumption, increase donations, reduce tax evasion). Most studies to date have concentrated on evaluating the effect of different types of messages but they have avoided discussing if the method to communicate those messages could affect the effectiveness of the intervention. This study shows that the effectiveness of a message is not independent of the communication method used. We conducted a field experiment in Colombia that varies the way the National Tax Agency contacts delinquent taxpayers. More than 20,000 taxpayers were randomly assigned to a control or one of three delivery mechanisms (letter, email, and personal visit). Conditional on delivery of the treatment, a personal visit is more effective than an email, and both are more effective than a letter (the more traditional method used by tax administrations and researchers worldwide). The findings show that identifying the mechanisms through which policies are informed and publicized should be fully incorporated in the literature to assess the effectiveness of an intervention. Tax administrations should explicitly evaluate what is the right vector of communication methods that maximizes their policy objectives.

When the tax authority increases the enforcement for one tax, what happens to the level of compliance in other taxes (spillover effect)? In this paper, we present a simple analytical model that shows that the sign of the spillover depends on how taxpayers update their beliefs about penalties and detection probabilities for one tax after observing the deterrence actions the tax agency takes for another tax. As a result, when spillovers are present, penalties and detection may not necessarily be interchangeable policy tools. We evaluate the sign of the spillover in the context of a randomized field experiment in a municipality in Argentina in a sample of about 700 taxpayers who are liable for both the property and gross-sales taxes. The evidence from the intervention indicates that the spillover from a message that increases the salience of penalties and enforcement for the property tax on the declaration in the gross-sales tax is positive. Those in the treatment group increase their reported tax by two percentage points more than the control group. This result has ample implications for researchers bringing interventions to the field and for governments’ enforcement strategies.

Tax evasion is a pervasive problem in many countries. In particular, some developing countries do not collect even half of what they would if taxpayers complied with the written letter of the law. The academic literature has not been oblivious to the need to explain why people pay (or do not pay) taxes. However, the empirical literature has not yet reached consensus. This paper reports the results of a large field experiment that tried to affect compliance by influencing property tax taxpayers’ beliefs regarding the levels of enforcement, reciprocity, and peer-effects of the tax system in a municipality in Argentina. Results indicate that those taxpayers that received the deterrence message have a higher probability (almost 5 percentage points) to comply than the taxpayers in the control group. No average effects are found for the other two treatments. However, this average effects masks important results. After receiving the reciprocity and the peer-effects messages, the probability of compliance increased for some taxpayers but it decreased for others according to their underlying distribution of beliefs. The evidence in this paper advances the state of knowledge, may help to reconcile some of the results in the literature, and provides the basis for advancing policies and research on tax compliance in developing countries.

Punitive anti-crime policies in the Americas have contributed to steadily increasing rates of incarceration. This creates prison overcrowding and can lead to recidivism. Harsh penalties are often demanded by citizens, making them politically attractive for politicians. Yet the contextual determinants of participation in crime are rarely understood by the public. In this paper, we employ a survey experiment conducted in Chile in order to examine how the provision of information about the prison population shapes tastes for punitive anti-crime policies. Respondents in the treatment group received information about the low educational attainment of prisoners. This information led to substantial changes in policy preferences. Tasked with allocating resources to anti-crime policies using a fixed budget, treated respondents assigned between 20% to 50% more to socially oriented anti-crime policies (relative to punitive policies) than respondents in the control group, and they reduced their support for “iron fist” policing. This indicates that providing information to citizens might change the policy equilibrium in the Americas.

Most tax agencies use letters as the method of communicating with taxpayers. Still, other technologies exist that could be more effective. This paper reports the results of a field experiment conducted by the National Tax Agency of Colombia (DIAN), using phone calls to reduce tax delinquencies. DIAN randomly assigned 34,000 tax debtors to a phone call operation using a fixed script to discuss existing debts and invite taxpayers to a meeting at the local tax agency oce. Phone calls were very effective in increasing collection of unpaid taxes. Conditional on the phone call being made, the effect on the treatment is about 25 percentage points higher than the control group (about a five-fold increase). We also find suggestive evidence that the personal interaction seems to be an important channel for explaining taxpayers' behavior. Faced with a tax agent, taxpayers tend to commit to attending the meeting and paying the tax owed. However, many taxpayers who commit do not make payment effective. The findings complement a nascent literature that shows that there are plenty of gains from innovating in communication strategy. They also indicate that personal interactions are important, but they have to be paired with easy-to-follow and immediate actions. Paying taxes is easier said than done.

This paper evaluates the effect of positive inducements on tax behavior by exploiting a natural experiment in which a municipality of Argentina randomly selected 400 individuals among more than 72,000 taxpayers who had complied with payment of their property tax. These individuals were publicly recognized and awarded the construction of a sidewalk. Results indicate that: i) being selected in the lottery and publicly recognized by the government has a positive but not persistent effect on future compliance; ii) receiving the sidewalk has a large positive and persistent effect; iii) high and persistent spillover effects exist: some neighbors of those who receive the reward comply more too, and these effects can be even larger than the direct effects; and iv) there is no financial motive effect; i.e., people do not pay their taxes just to participate in the lottery. Recognition serves only as a short-term incentive, but the provision of a durable and visible good has more persistent and broader effects. These findings provide evidence on features that make a positive inducement more successful, whether for tax compliance or other policy purposes.

Limited attention affects our ability to make good choices, but governments can improve decision-making by providing simpler and more salient information. We evaluate the role of inattention in decision-making in the context of a field experiment implemented during a tax amnesty in the city of Santa Fe (Argentina). Tax amnesties are advertised to delinquent taxpayers through direct communication. In the intervention, we redesign the communication notices sent to the taxpayers to evaluate whether increasing salience and reducing cognitive costs increase the probability that taxpayers put attention to the message and understand better the benefits of tax amnesty. We randomize more than 54,000 taxpayers. A group of taxpayers receives the traditional messages. The treatment groups receive redesigned communications. Our results show that messages that reduce the cognitive costs increase the probability that taxpayers will enter the tax amnesty. The amount collected in the treatment groups is up to 8 percent higher than in the control group. We also exploit the exogenous variation in attention to evaluate the convenience of the tax amnesty program for the city given that some people may stop paying the regular bills (creates moral hazard). We find that while people are more willing to cancel their past debt, they are also more likely to reduce their compliance with the current tax bills. Moreover, there is a negative spillover effect in the compliant population (those who had no debts). When the tax amnesty becomes more noticeable, their incentive to comply falls substantially. Making public policy more salient, easier to understand, and less cognitive intensive facilitates decision-making. However, doing it during a tax amnesty may increase collection of past debt, but it could also generate negative incentives for tax compliance in the overall population.