#109 2011 · UK Behavioural Insights Team / HM Revenue & Customs · Government / tax collectionlegibility
Telling late taxpayers that almost everyone else already paid moved £2.4 million in three weeks, with no threat, fine or new enforcement
the problem
The obvious lever for getting people to comply with a rule (threaten a bigger penalty) is also the most expensive and adversarial one to pull
background
HM Revenue & Customs sent the same standard reminder letter to taxpayers who had declared but not yet paid their tax bill for years, essentially restating the amount owed and the consequences of nonpayment, with response rates that had plateaued — the default lever tax authorities reach for to improve on-time payment is escalating threat: bigger fines, more explicit enforcement language, faster referral to collections.
The UK Cabinet Office's Behavioural Insights Team, established in 2010 and popularly known as the 'Nudge Unit,' set out to test something different with HMRC: rather than making the penalty more frightening, tell taxpayers an accurate fact about what their peers were actually doing, on the theory that people calibrate their own compliance partly against a belief about how many others are complying.
the move
Around 100,000 taxpayers who owed declared but unpaid tax were randomized across several reminder-letter variants, the most effective of which added a specific social-norm statement — that the great majority of people in the recipient's own local area or town had already paid their tax on time — rather than repeating the amount owed or the penalty for nonpayment. No fine was increased, no new enforcement mechanism was introduced; the only change was one added sentence stating an accurate local norm.
the payoff
Payment rates rose from roughly 67.5% in the standard-letter control group to as high as about 83% with the most localized 'home town' norm message — pulling forward an estimated £2.4 million in tax payments within a 23-day trial window, with the Behavioural Insights Team projecting the approach could advance roughly £160 million of tax debt collection over a six-week period if applied at scale.
what came after
The HMRC tax-letter trial became one of the most cited proof-of-concept studies for the UK's Behavioural Insights Team and for social-norm messaging in public policy generally, published in peer-reviewed economics research (including a study titled 'The Behavioralist as Tax Collector') and replicated in various forms by other tax authorities and government behavioral-science units internationally.
references
- [1]How Normative Messaging Increased Tax Compliance by 15%The Decision Lab, 2021thedecisionlab.com
- [2]Behavioural science nudges can stop tax avoidanceWarwick Business School, 2017wbs.ac.uk