The transition to a capital value-based (CV) property tax system in Pakistan presents both opportunities and challenges for tax administration. The shift from a regressive area-based annual rental value system to a self-reporting CV system requires taxpayers to assess their own property values, promoting fairness but increasing the risk of mistakes, underreporting, and evasion.
These challenges are heightened by low tax morale and limited taxpayer understanding, making it essential to explore how behavioural factors – such as heuristics and misconceptions – impact tax compliance.
Focusing on the case of Punjab, this project comprises a survey experiment to answer the following research questions:
- To what extent does tax evasion happen due to taxpayers’ cost and benefit assessment versus due to mistakes brought about by low tax knowledge?
- To what extent are taxpayers willing to engage with factual information for tax compliance and update their misconceptions if offered accurate information?
- What role do heuristics play in shaping taxpayer compliance behaviour in contexts with low tax knowledge?