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The Effects of Penalty Information on Tax Compliance: Evidence from a New Zealand Field Experiment

Norman Gemmell and Marisa Ratto

Abstract:

This paper examines the effects of late payment penalties on tax compliance based on an experiment involving New Zealand goods and service tax (GST) late payers using a late payment model in which the probability of enforcement, rather than detection, is central. A field experiment involving a specific compliance intervention, allows us to examine how taxpayers respond when given different penalty information, examining effects on both taxpayers' stated compliance intentions and subsequently observed behavior. Results suggest that differences in penalty information given to taxpayers and reductions in penalty rates affect compliance stated intentions but actual behavior is generally unresponsive.

Citation

Norman Gemmell and Marisa Ratto(2018), The Effects of Penalty Information on Tax Compliance: Evidence from a New Zealand Field Experiment , National Tax Journal, 71:3, pp. 547-588

DOI: doi.org/10.17310/ntj.2018.3.05