Nudging businesses to pay their taxes: Does timing matter?

This paper provides theoretical and empirical evidence on the implications of the timing of reminders by
studying the effect of varying the timing of reminder letters to taxpayers on their payment behavior. The
collection of unpaid tax debts constitutes a considerable challenge for tax authorities. We show that
varying the timing of a reminder letter has a theoretically ambiguous effect on tax payments. We study the
payment behaviour of business taxpayers in a field experiment in Australia and find that a simple reminder
letter increases the probability of payment by about 25 percentage points relative to a control group that
does not receive a letter from the tax authority. However, variation over a three-week period in the timing
of the reminder letter has no effect on the probability of payment within seven weeks of the due date. Our
findings indicate that sending reminders early results in faster payment of debts with no effect on the
ultimate probability of payment.