Tax compliance in Eswatini – a nudging experiment
Tax to GDP ratio in developing countries is still remarkably low. One of the key factors behind poor tax collection is low tax compliance. This study aims to test, using a randomized controlled trial, the effect of a multi-faceted nudging strategy from the Eswatini Revenue Authority (SRA), targeting the whole population of income taxpayers in Eswatini, of about 39,000 units. The innovations of this study are manifold. First, it fills the gap in knowledge on which revenue mobilising strategies are more effective in Africa, adding to a similar ICTD study ran in Rwanda. Very little similar research has been carried out in Africa, limited in scope and targeting a subgroup of the whole taxpayer population. In this case, the SRA will target the whole population of taxpayers, divided into three specific compliance categories: active, non-filers and nil-filers; and in two taxpayer types: corporate vis à vis individual. Second, the content of the nudges, which is derived from the recent findings of behavioural economics, is not the same for everyone but adapted to each subgroup. Third, detailed survey data will be collected for a subsample of 1,000 taxpayers in order to gain richer information, beyond what we observe from the SRA administrative data, and explore the mechanisms through which tax compliance takes place. Survey data will be matched with administrative data in a novel way, whereas most of the nudging literature just focuses on tax returns.
The final goal is to provide robust experimental evidence on the alternative forces that drive taxpayers to comply as well as to pilot an innovative, and plausibly cost-effective, strategy of tailored communication between tax authority and taxpayers fostering compliance. If proved to be effective, behavioural nudges can be included as an additional tool in the policy toolkit of SRA and complement the existing traditional strategies to mobilise revenues, such as audits or change in the tax legislation.