Weber's Nudge: Does Signaling Procedural Fairness on Tax Bills Increase Compliance?

Abstract

How can governments tailor tax bills to maximize tax compliance? In this study, we collaborate with the Freetown City Council (FCC) to send different versions of Rate Demand Notice letters (RDNs)—the official property tax bill in our setting—to the universe of property owners in Freetown. A large literature has explored how communicating enforcement threats and service delivery achievements through tax messages influences compliance. Here, we provide novel evidence on a previously understudied messaging strategy that conveys the increased procedural fairness of tax collection in our setting, where a recent reform scrapped in-person collection and opened up official avenues for property owner to appeal their tax rate. On the tax bills procedural fairness “nudges” take two forms: a first treatment group receives information on the appeals process. A second treatment group is made more aware of the switch from in-person tax collection—notoriously susceptible to collusion—to direct tax payments via banks. With additional treatment arms we also study the impact of enforcement and service delivery messaging, allowing us to benchmark the effects of the procedural fairness appeals against messaging strategies more commonly studied in the literature.