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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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Presentation Transcript
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



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
australian government debt correspondence






Increased debt



Paid in part

or in full

Entered payment arrangement






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 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


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.


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





decision-making context


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