Behavioural economics is increasingly being used by tax administrations to inform and design the corresponding tax compliance interventions. Behavioural insights provide new reasons to intervene – for example, to encourage taxpayers to report income and wealth generated abroad, make more use of online services for tax filing, increase the use of the tax guidelines, etc. In the last few years, IOTA members have launched institutional/international projects seeking to implement behaviour change techniques in key areas of tax administration. The adoption of a more systematic and transparent approach to the application of behaviour economics can contribute to the better design and improvement of tax compliance interventions, including tax debt management operations. There is a space for tax administrations to undertake more actions to collect tax debts that are due, and therefore IOTA, in close cooperation with Revenue Service of Georgia, organised the 10th meeting of IOTA Area Group on Debt Management in Tbilisi, Georgia on 5-7 October 2016 aiming to share latest thinking, international practice and evidence of applying behavior change initiatives in tax debt management area, and to build a greater understanding of "what works" and under which conditions (e.g. cultural, geographic, etc.). 30 Area Group members from 24 countries along with the representatives of the European Commission's Taxation and Customs Union Directorate-General as well as from the Joint Research Centre explored and discussed the use of behavioural insights and practical application of behaviour change techniques, particularly in reminder letters and outbound calls to debtors, and the effectiveness of different randomised controlled trials in order to examine the impact of reminder letters and message variants on tax paying behaviour. In addition to this, participants were informed about progress of the ongoing IOTA project on Measuring Debt Management Performance sponsored by Federal Finance Service of Belgium, and agreed on priority areas of the Area Group work in 2017.
As a part of News Headlines on the first day of the meeting, Area Group members gained insights on “Early Warning System for SME and Large Enterprises”. This tool, being piloted in the Netherlands, is aimed at identifying debt risk leading to appropriate measures being taken to limit non-payment of companies who suddenly face financial difficulties. Later the meeting was ultimately devoted to the subject of Behaviour Economics and its agenda was structured around 4 plenary sessions: 1. Introduction to Behavioural Economics; 2. Use of Behavioural Economics in managing tax debts: from project based approach to daily routine; 3. Evaluation Approaches: Use of Randomized Controlled Trials; 4. Behaviour Change Initiatives, including the Use of Behaviour Change Techniques for Outbound Calls to Debtors.
Participants got introduced to Behavioural Economics by European Commission’s Joint Research Centre in a presentation “Applying behavioural insights to policy-making in the EU”. Apart from receiving a general overview of the subject, members were informed about the work in this field in the Commission and about ideas how behavioural insights can be applied to tax administration. Members were further introduced to behavioural Economics by a presentation of United Kingdom that covered the approach applied by UK HMRC and also gave a comprehensive explanation about MINDSPACE, the insights and levers for influencing Behavior. This was followed by a group discussion were delegates considered the relevance of Behavioural Change to the debt management function. The first day ended with two further country examples from Belgium and from Poland sharing their experience and lessons learned from the recent projects on implementation of behaviour change techniques.
The focus of the second day was on the practical application of behavioural change techniques. The day started with examples of using “Randomised Controlled Trials” with country examples presented of Norway and the Netherlands. Further country examples of using behavioural economics in debt management were presented by Slovenia, Portugal and Switzerland. These presentations were followed by further group work in the form of a challenging practical assignment with delegates getting the chance to practice the MINDSPACE framework in drafting a reminder letter to encourage taxpayers to pay their tax debt. The letters designed by each group were presented in plenary for evaluation of how effective framing of text of the standard tax payment reminder letter was. The day ended with two presentations of examples of applying behavioural insights to framing the message for outbound calls to debtors, from Belgium and from United Kingdom.
The third day consisted of a panel discussion on how to adjust the application behavioural economics in different cultures across IOTA membership and make it sustainable. This was followed by an update of the IOTA Project “Measuring Debt Management Performance" from Belgium including the next steps required from the Area Group Debt Management with regard to submission of additional information to the survey, and the planning of country visits to conduct indepth analysis of advanced approaches in debt management measurement. The final session was dedicated to workshop evaluation and discussions on the priority areas for the Area Group in 2017.
All meeting material including presentations is available here for IOTA members.