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March 2016 //
Canadian Government Executive /
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While a certain type of messaging or nudge might work now,
there is no guarantee that the technique won’t grow stale and that
people will revert back to their old habits. On a grander scale,
some critics of nudging, including
The Economist
, claim that these
higher rates of collection may provide a shot in the arm to cash
strapped governments, but in a world of billion-dollar national
debt and deficits, the amount of money practices like nudging will
not solve national problems.
The CRA has established itself as a “nudge” leader within the
government of Canada. That reputation will continue to consoli-
date as it continues to build evidence-based approaches using be-
havioural economics.
others received a standard collection letter. The CRA then tracked
the change in repayment rates between these groups.
Studies had shown that people did not focus on the details of
collection notices, so for this experiment the CRA put its nudge
right near the top of the letter, followed by the amount owing
and then the standard content. In all, 8,000 outstanding accounts
(owing between $100 and $950) were involved in the experiment.
They were divided into four groups of 2,000. The first control
group received no letter, the second received the standard collec-
tion letter, the third group received a positive nudge, and the final
group were given a negative nudge.
“Nudges may vary in the way a certain message is framed. For
instance, in relation to the above mentioned study, the ‘positive’
nudge was the presentation of tax compliance as the behavioural
norm of the majority. On the other hand, the ‘negative’ nudge was
the presentation of tax non-compliance as behaviour associated
with the minority,” said Brideau.
In other words, a positive nudge would tell the readers of a let-
ter what a large percentage of people pay their taxes, while a neg-
ative nudge would indicate to the recipient that they were among
a small number of Canadians who haven’t paid their taxes.
The results of the study were quite encouraging. “The results
revealed that the nudge letters were more effective at increasing
taxpayer compliance compared to a standard CRA compliance
letter. Specifically, a higher percentage of those who received the
nudge letters paid their debt in full (9 per cent of those who re-
ceived a letter with a “negative” nudge message and 8 per cent
who received a letter with a “positive” nudge message) compared
to those who received the standard compliance letter (7 per
cent),” said Brideau.
From the government’s perspective the results of the experi-
ment provided welcomed news. Full repayment of taxes owed
may be a pipe dream, but a solid increase in collection through
means as affordable as changing the content of a collection letter
could be a real boon for government coffers.
“Nudge techniques can hold significant power to improve pub-
lic policy outcomes,” said Brideau. “Nudge techniques have been
shown in many cases to be effective at producing behavioural
change in a manner that is cost-effective and does not substan-
tively limit individual choice.”
This is why nudging has become so popular. “The long-term
impact of nudges is an important consideration for policymak-
ers,” said Brideau. “Given that many of the experiments involving
these techniques at the Agency have occurred relatively recently,
more research is needed to consider longer-term effects. That
said, a number of CRA experiments have been or may be revisited
over time to evaluate the long-term impact.”
Strategy
From the government’s perspective the results of the experiment
provided welcomed news. Full repayment of taxes owed may be
a pipe dream, but a solid increase in collection through means as
affordable as changing the content of a collection letter could be
a real boon for government coffers.