Behavioral Insights for Tax Compliance : A Whole-House Approach to Improving Taxpayer and Tax Official Beliefs, Attitudes, and Behaviors

The objective of this note is to summarize the role of behavioral science in tax compliance and tax administration, elaborating on a previous note outlining the World Bank's past work in this area (Dalton et al., 2021). This note will provide an overview of a behaviorally informed approach to tax compliance and highlight how behavioral insights can be useful for diagnosing and confronting tax compliance challenges (section II), provide thoughts on a way forward for integrating behavioral insights into revenue administration, summarizing evidence from the field (section III), and present the approach and experience of the World Bank in this space (Annex). The note will place particular emphasis on the experimental and quasi-experimental literature on behaviorally-informed solutions to improve compliance and collection and group these into three generalized tools: the nudge (modifications to the decision environment), the budge (elevating new narratives around tax compliance), and the trudge (taking an inward-looking approach to improving compliance). We also developed a Practitioner's Guide where we provide detailed "how-to" on applying behavioral insights for revenue collection