Evaluation of an intervention to increase online filing of individuals’ tax returns Peter Lumb...

Evaluation of an intervention to increase online filing of individuals’ tax returnsPeter LumbSeptember 2009

SA316 online filing pilot | September 2009 | 2

Contents

• Self Assessment

• SA316 pilot

• Summary results

• Logistic regression to predict adoption of online filing

• Summary and Conclusions


Self Assessment – key facts

• Income Tax returns for Individuals, Partnerships and Trusts

• 9.6 million returns for 2007/08

• HMRC has had targets for increasing electronic filing for several years

• For tax year 2007/08, 69% of returns filed by 31 Jan 2009 deadline were by Internet

• Internet filing saves administrative costs and is liked by the taxpayers who use it


Self Assessment: how taxpayers are asked to file

• Customers who previously filed on paper normally sent a paper return and guidance. Two types of paper return:

• Short tax return (STR) (four sides A4 paper plus guidance)

• Full/ main tax return: for more complex affairs/ income sources: longer with supplementary schedules for infrequent income types

• Customers who previously filed by online or through an advisor/ accountant sent a 2 side letter: Notice to Complete a return (SA316 form)

• SA316 is not a tax return itself. Advises customers how to file online or via a tax agent, or otherwise contact HMRC for a paper form.


SA316 pilot

• Research question: Does sending an SA316 – instead of a paper return and associated guidance – to unrepresented taxpayers previously filing on paper encourage online filing?

• Pilot group: 10,000 individuals who filed on paper for 2005/06: send SA316 notice for 2006/07 tax year – instead of paper return

• Control group: a further 1,000 taxpayers

• Selected from one office for practical reasons


Summary results

• Filing method of taxpayers in pilot and control groups for 2006/07 analysed

• Analysed separately for people sent a Short tax return and those sent a full/main tax return for previous year (2005/06)


Short tax return filers (2005/06) – filing for 2006/07

Control group Pilot group

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Full return Short return Internet Very late orno filing

Other


Full return filers (2005/06) – filing for 2006/07

Control group Pilot group

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Full return Short return Internet Very late orno filing

Other


Logistic regression: to predict switching to online filing

• Aim:

• To gain a better understanding of factors associated with adopting online filing

• To build a statistical predictive model that can be used to target taxpayers most likely to adopt online fling

• Process:

• Exploratory analysis

• Model building and results


Adoption of online filing: previous year’s return type

0%

10%

20%

30%

Control Pilot

Short return Full return Short return Full return


Adoption of online filing: male/female, control/pilot splits

0%

10%

20%

30%

Control Pilot

Male Female Male Female


Adoption of online filing: employee and control/pilot

0%

10%

20%

30%

Control Pilot

Employee not Employee Employee not Employee


Adoption of online filing: employee (directors only)

0%

10%

20%

30%

Control Pilot

Director Not director Director Not director


Adoption of online filing: self employed (sole trade)

0%

10%

20%

30%

Control Pilot

Sole trader Not trader Sole trader Not trader


Adoption of online filing: land and property income

0%

10%

20%

30%

Control Pilot

Landlord Not Landlord Landlord Not Landlord


Adoption of online filing: free software applicable

0%

10%

20%

30%

Control Pilot

No Yes No Yes


Adoption of online filing: Financial Strategy Segments

0%

10%

20%

30%

40%

A - Suc

cess

ful S

tart

B - Hap

py H

ouse

mat

es

C -

Survi

ving

Sin

gles

D -

On

the

Bread

Lin

e

E - Fl

ouris

hing

Fam

ilies

F - C

redi

t-hun

gry

Fam

ilies

G -

Gilt-

edge

d Li

fest

yles

H -

Mid

-life

Affl

uenc

e

I - M

odes

t Mid

-yea

rs

J - A

dvan

cing

Sta

tus

K - Age

ing

Wor

kers

L - W

ealth

y Ret

irem

ent

M -

Elder

ly Dep

rivat

ion

Not

cla

ssifie

d

Not

mat

ched


Adoption of online filing: Marital Status

0%

10%

20%

30%

40%

Control Pilot

Sin

gle

Ma

rrie

d

Div

orce

d/ S

epa

rate

d

Wid

ow

ed

Not

ava

ilab

le

Sin

gle

Ma

rrie

d

Div

orce

d/ S

epa

rate

d

Wid

ow

ed

Not

ava

ilab

le


Adoption of online filing: previous year’s filing date

30 Sept. filing deadline

0.0

0.2

0.4

0.6

0.8

1.0

31 May 06 30 Sep 06 31 Jan 07


Adoption of online filing: Age and Sex

0.0

0.5

1.0

20 40 60 80 100 20 40 60 80 100

Control Pilot

Male Female


Adoption of online filing: Income

0.0

0.5

1.0

0 10 40 100 200 350 0 10 40 100 200 350

Control Pilot

Income (000s) (square root scale)


Logistic regression: model

• Good fit achieved • (Hosmer-Lemeshow statistic p value 0.92)• Good predictive capability


Predicted probabilities by age, control and pilot groups

0.0

0.2

0.4

0.6

0.8

20 30 40 50 60 70 80 90

Full return in 2005/06

0.0

0.2

0.4

0.6

0.8

20 30 40 50 60 70 80 90

Short return in 2005/06


Model performance

0

0.1

0.2

0.3

0.4

0.5

0.6

1 2 3 4 5 6 7 8 9 10

Taxpayers ordered by predicted likelihood of switching to online filing (deciles)

Overall proportion switching


Logistic regression: key results – on adoption of online filing – pilot group

• Pilot cases that could use HMRC software – 4.2 times more likely

• Employees in pilot group – 2.6 times more likely

• Both employee and HMRC software applicability – 10.9 times more likely

• Directors less likely to switch than other employees


Logistic regression: key results – on adoption of online filing – control group

• Pilot cases that could use HMRC software in control group – about half as likely as other control group cases

• Employees in control group – about half as likely

• Both employee and can use HMRC software – around a quarter as likely to adopt online filing as other customers in control group


Logistic regression: key results – on adoption of online filing – all customers (both pilot and control)

• Single and also divorced/separated individuals – less likely to switch

• Men slightly more likely than women to switch to online filing, depending on return type

• Some Financial Strategies Segments – less likely

• For each additional year of age over about 40: up to 5.5% decline in probability of filing online

• Increasing take-up with income


Summary and conclusions (1)

• Pilot highly effective for some types of taxpayer – some groups ten times more likely to adopt online filing

• Less impact for taxpayers with more complex affairs – such taxpayers more likely to take on an agent who may often file online on taxpayers behalf (irrespective of pilot/ control)


Summary and conclusions: future directions (2)

• Model could be used for future targeted exercises to encourage online filing

• Potential benefit of lower costs, better overall customer satisfaction and less risk of non-filing

• Potential to draw additional insights from application of behavioural economics insights

• Discussion on possible operational applications in HMRC’s work planned

Evaluation of an intervention to increase online filing of individuals’ tax returns Peter Lumb...

Documents

Transcript of Evaluation of an intervention to increase online filing of individuals’ tax returns Peter Lumb...