The $100 million nudge

Abstract

This paper uses a natural field experiment to examine the effectiveness of deterrence messages on tax compliance in the Dominican Republic. In collaboration with the tax authority, we sent messages to 56,310 firms that collectively paid $700 million in the year before the experiment. Our field experiment complements a tax enforcement reform in the Dominican Republic a year before our intervention. Sharing information about prison sentences or the public disclosure of evasion arising from the tax enforcement reform increases tax revenue by $184 million (0.22% of GDP). Using a unique sample that covers the entire firm size distribution, we show that the largest firms, that pay 84% of all corporate income taxes and typically have been excluded from this type of intervention, are highly responsive to our information treatments. Show more