N udge enablers at the canada revenue agency
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N udge enablers at the Canada Revenue Agency. N udge w orkshop July 22, 2014. Presentation overview. What is nudge? N udge a pplication in international t ax a dministrations N udge i nitiatives at the Canada Revenue Agency (CRA) Step-by-step g uide to nudge. What is nudge?.

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N udge enablers at the canada revenue agency

Nudge enablers at the Canada Revenue Agency

Nudge workshop

July 22, 2014


Presentation overview

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


What is nudge

What is nudge?

  • A policy intervention aimed at changing economic behaviour

  • Targets the decision-making environment

  • A cost-effective way to facilitate voluntary compliance

+

PSYCHOLOGY


Effective nudge c haracteristics

Effective nudge characteristics

  • Simple information

  • Easy process

  • Positive focus

  • Presents options

    • Highlight the ‘best’ option

  • Uses social norms

  • Highlights benefits of desired behaviour


Uk government social norms and timely f iling

UK government: Social norms and timely filing

  • UK


Australian government debt correspondence

8%

6.8%

6%

4.3%

4%

2%

Increased debt

Unpaid

0%

Paid in part

or in full

Entered payment arrangement

-2%

-2.6%

-4%

-4.2%

-6%

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 non-compliance compared to previous letter

Compliance behaviours compared to control group


Cra get it in writing campaign

CRA: ‘Get it in Writing’ Campaign


Cra automatic d ialing announcing device adad

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

  • Results: Increased filing compliance by taxpayers contacted through ADAD, compared to those not contacted


Cra tax free savings account tfsa approach under development

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


N udge initiative components

Nudge Initiative components

Develop

step-by-step guide to nudge

Recruit behavioural scientists

Partner with academics


Step by step guide to nudge

Step-by-step Guide to nudge

  • Determine the appropriateness of nudge approach

  • Select and test a suitable nudge intervention

  • Measure results and make recommendations

  • Full implementation of nudge intervention


Step 1 appropriateness of nudge

Step 1: Appropriateness of nudge

  • Key considerations:

    • Objective

    • Target population

  • Examples:

    • Scenario 1: Business owners from a sector known to be part of the underground economy significantly underreported their income.

    • Scenario 2: Taxpayers late-filed their tax return for the past 2 years.

X


N udge enablers at the canada revenue agency

Step 1 continued

  • When is nudge most likely to increase compliance?


Step 2 select and test nudge

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

Feasible agency approach

Ideal research design


Step 3 measure r esults make recommendations

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?


Step 4 full implementation

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


Benefits of nudge a pproach to compliance

Benefits of nudge approach to 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

Attitudes,

cognitions,

environment,

norms,

decision-making context

Compliance


Where do we start

Where do we start?

  • Start small and prove nudge works

Timeframe for Results

Move to e-services

Desired result:

Increase direct deposits

Change in filing behaviour

Desired result:

Restore regular filing activity

Taxpayer owes money

Desired result:

Payment is received

New tax credit results in high volume of enquiries

Desired result:

Decrease in phone enquiries

Complexity


Thank you jean francois ruel@cra arc gc ca

Thank [email protected]


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