Tax Compliance Research using Administrative Data in Rwanda
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Tax Compliance Research using Administra7ve Data in Rwanda UNU-Wider & ICTD Workshop 9 February 2016 Giulia Mascagni (ICTD), Denis Mukama (RRA), Christopher Nell (ICTD)
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Transcript of Tax Compliance Research using Administrative Data in Rwanda
TaxComplianceResearchusingAdministra7veDatainRwanda
UNU-Wider&ICTDWorkshop
9February2016
GiuliaMascagni(ICTD),DenisMukama(RRA),ChristopherNell(ICTD)
Agenda
1. Overviewofresearchproject
2. Experimental design, implementa<on, andlessonslearnt
3. Preliminaryresultsfromdescrip<vesta<s<cs
Part1Overviewof
ResearchProject
GeCngStartedProject7tle:TaxcomplianceusingAdministra4veDatainRwandaPrepara7onphase• Objec7ves: data availability, feasibility of research, develop
researchdesign,policyrelevance,RRA’swillingnesstopar<cipate• Outcomes:dataavailable,many ini<a<vesoncomplianceatRRA,
but liIle evalua<on of policies, knowledge gap on the drivers ofcompliance
Implementa7onphase• ATAF,ICTD,RRAcollabora<on
OverviewofProjectObjec7ve: Iden<fy drivers of compliance and testcommunica<onstrategiesthatRRAcanadopttoincreasecomplianceAc7ngasateam:• FormalapprovalfromtheCG• FundingfromICTD/ATAF• Interna<onalteamwork
– Researchers,externalreviewers,RRA• Regularfeedbackonideasanddesign• Maintainingconfiden<ality
MainAc<vi<es• Descrip<vesta<s<cs
– Progressivitybytaxtypes,size,loca<on– Es<matesofcomplianceusingauditdata– Feedsintoexperimentaldesign
• Self-disclosureexperiment– Pilotstudy(informa<onaboutsanc<ons)– Voluntaryrec<fica<onofdeclara<ons
• Large-scaleexperimenttoevaluateeffec<venessof– Messagestoincreasecompliance– Deliverymethods
• CapacitybuildingatRRA– Interac<veworkshops(e.g.researchproposals,experimentaldesign)– Learningbydoing– STATAtraining
Part2ExperimentalDesign,
Implementa<on,andLessonsLearnt
Timelineofexperiment1(pilot)
Auditplan(EndJune2015)
Selfdisclosure/rec<fica<onsBeforeauditno<fica<ons
Windowsforanalysis:3months,6months,…
LeTerbeforeauditno<fica<on• Ifcaughtbyaudit:finesfor
under-andlate-repor<ngupto60%(plusinterest)
• BUTifrec<fica<onbeforeauditno<fica<on:only10%(plusinterest)
Effecton• Probabilityof
rec<fica<on• Amountofrec<fica<on
(par<alorfull)• Perhapsfacilitates
audits
Informa<onleIers(sentfor3weeksfrommid-July)
AuditongoingnormallyfromAugust2015un<lJune2016
8-10September:actual
implementa<on
ExperiencesfromPilotq Capacityconstraintsduetoother(unexpected)workatRRAq Databaseissues
q Replacementofselectedtaxpayersduetoincompleteloca<oninfoq Unforeseendelays
q Auditplanobtainedlaterq Formalauthoriza<ontodeliverthroughauditors
q LeIerprepara<onwas<meconsumingq AddressesonleIersandmailbyhandetc.
q AnumberofleIerswerenotdelivered:q Inac<vephonenumber,refusedtotakeleIer,phoneoff
q Solu<onsq Automa<cpersonalisa<onsuchasmailmergeq Internsforbigprojectsq Discussionwithauditors(e.g.keeptrackofTIN)q Updatedatabaseregularly,especiallyphonenumbers(coordina<on
ofdifferentRRAdepartments)
Ini<alResponsesfromTaxpayersq 26callsredirectedtoR&P(recordedwithtemplate)
q 2leIersaddressedtoCGdirectlyq 1resultedininves<ga<oncase
q Severalreac<onsdirectlyaddressedtoTPSq Storyoftheangrymenturnedhappy
q Ques<onstoRRAq Benefits of taxpayers to be reminded about sanc<ons andpossibilitytorec<fy
q Benefitsofauditorsofspendingless<meonaudits
q Willbeabletoseerevisionsindata[analysedsoon]
TimelineofExperiment2
31/122014
31/32014
31/122015
30/032016
Taxreturn1 Taxreturn2
Messages1. Importanceoftaxtofund
publicservices2. Stressenforcement3. Controlmessage
Effecton• Levelofcompliance
(e.g.paidon<me,cancelleddebts)
• Comparedeclara<onstopreviousyear…
• Compare“treatment”&“notreatment”
Sample• CITandPIT
taxpayerswithphonenumbers
MainExperiment:Mo<va<onq If taxpayers are approached through differentmessagesanddeliverymethodsq theywill internalize theprobabilityofdetec4onandtheirbeliefs about RRA differently, and therefore they willmodifytheirtaxcompliancebehaviorindifferentways.
q Wewillanalyzetheeffec<venessofourinterven<onbylookingatrealtaxpayerbehaviorbyusingRRA’sdatabases
Treatmentsq Threedeliverymethods
q Mailq Email
q plusremainderq Iden<calmessagesinphysicalleIersandemails
q SMSq moreconcise(163characterlimit)q plusremainder
q Messages
q Controlmessageq Generalinforma<onfromRRAaboutfiling
q Publicserviceq Taxescontributetopublicservicessuchaseduca<on,healthcareandsecurity
q Deterrenceq Emphasizesfinesandpossibleprosecu<on
q Personalisedmessages(names),graphsadded,English/Kinyarwanda
SampleOverviewq 45,000ac<veCITandPITtaxpayersq Experimentincludes
q E-taxfilersq Registeredin2013and2014q RegisteredinKigaliprovince
q likelytohaveup-to-datephonenumbersandemailaddresses
q CITq Phoneandemailfor94%outofe-tax/newtaxpayers–10,600q Usealldeliverymethodsandmessages(3x3treatments)+control
q PIT
q Ac<vephonesfor47%andemailsforlessthan1%q UseSMSfor2,800taxpayers,asmorefeasibleforRRA
CITTreatments
q Group1:no<fica<onbymailto3180taxpayers(1060x3messages)– Beginningoffilingperiod
q Group2:twoemailsfor3180taxpayers– Addi<onallyinMarch
q Group3:twoSMSfor3180taxpayers
q Group4:nono<fica<on,1060taxpayers
CITandPITTreatments
q Group1:no<fica<onbymailto3180taxpayers(1060x3messages)– Beginningoffilingperiod
q Group2:twoemailsfor3180taxpayers– Addi<onallyinMarch
q Group3:twoSMSfor3180taxpayers
q Group4:nono<fica<on,1060taxpayers
PITexperiment:twoSMS(2100taxpayersintotal)
Stra<fica<on
q Performrandomiza<onbasedonvariablesq forsubgroupanalysisq likelytopredictcompliance
q Nil-filersq Manytaxpayersfiledeclara<onwithzeroincomeq Reason:avoidfinefornotfiling,butnotaxliabilityq Nil-filersmayresponddifferentlytomessages
Stra<fica<on
q Regimetypeq Taxpayersinlump-sumregimehavehighertaxburden
q Maynotbeawareq Othercompensa<ngbenefitssuchaslowervisibility
q Nil-filingandregimetypemayberelatedtocompliance
OutcomeComparisons
q Differentmessages,giventhedeliverymethodq E.g.publicservicevscontrolmessageusingemail
q Deliverymethods,giventhemessage:
q E.g.publicserviceusingemail/mail/SMSrela<vetocontrolgroup
q Alsodiscussq SMSforCITandPIT
Part3PreliminaryResultsfromDescrip<veSta<s<cs
Findings
q Revenuesrelyheavilyonlargetaxpayersq 85corpora<onscontributemorethanhalfofCITrevenues
q 86%ofrevenuesfromKigali
q Smallertaxpayerspaymorerela<vetoincomeq Flatandlump-sumhavehighereffec<vetaxratesq Yetevademore
Findings
q Lowauditrates,especiallyforq SmalltaxpayersoutsideKigali(0.3%)q Firmsinflat(0.1%)andlump-sumregime(0.8%)
q Non-compliancebetweenLBof2%andUB35%,dependingontaxtypeq Lowerwherehigherenforcementefforts:VAT[3.5%,15.5%],largetaxpayers[1.2%,7.3%]
JointSummary
q Admindataforq Descrip<veanalysisq Experiments
q Coordina<on,teamwork,learningq Minimizedelaysq Regularupdateofdatabasesq Equalpartnershipsq FocalpointsatRA
Ques<onsandcomments?Thankyou.Pleasegetintouchwithus:Christopher:[email protected]: [email protected]: [email protected]: [email protected]
Appendix
Table&1.&Treatment&messages&
Message& Content&
Control'message' RRA'would'like'to'inform'you'that'your'CIT'tax'return'is'due'by'31st'March'2016.'For'more'information'about'the'filing'process'and'payment'methods,'contact'the'call'centre'(3004)'or'visit'the'RRA'website'(http://www.rra.gov.rw).'''''We'would'like'to'thank'you'for'your'collaboration'and'wish'you'a'prosperous'year'2016.'
'
Deterrence' Do' you' know' that' if' you' do' not' declare'and'pay'your'taxes'on'time,'RRA'can'fine'and'possibly'prosecute'you?''
Pay' your' taxes' on' time' and' avoid' fines'and'penalties.'
'
Public'services' By' paying' your' taxes' you' make' it'possible'to'educate'our'children,'fund'our'healthcare,'and'keep'us'safe.'
Pay'taxes.'Build'Rwanda.'Be'proud.''
'
'
CITtreatmentassignment1. Create four strata (groups) by using variables
indica<ngnil-filersandregimetype1. Nil+Realregime2. Nil+Lump-sumregime3. Posi<veincome+Realregime4. Posi<veincome+Lump-sumregime
2. Withineachstrata,randomlyallocate1/10ofsample
toeachof10treatmentgroups,asi. Threedeliverymethodsii. Threemessagesiii. ControlgroupreceivingnoleIer
q 10treatmentsx4groups=40cases
ETRbasedonoverallincome Decile PIT
FlatPIT
Lump-sum
PITReal
CITReal
1 20.6 3 2.2 3.02 2.7 3 1.2 1.63 2.7 3 1.3 1.64 2.8 3 1.2 1.45 2.6 3 1.4 1.56 2.3 3 1.5 1.87 2.0 3 1.5 1.48 1.6 3 1.0 1.49 2.3 3 0.8 1.410 2.1 3 0.7 1.5
Compliancegap
Scenario:
lowerbound(in%)
Scenario:
Upperbound(in%)
PITrealregime 4.8 34.8CITrealregime 2.3 24.7VATPAYE
3.52.1
15.510.3
KigaliOutsideKigaliLargeandtop-mediumSmallandmedium
1.95.3
1.25.7
11.564.9
7.343.7
