ACDE PhD seminar: Does deterrence treatment have a dynamic impact on tax compliance? Evidence from experimental study in Indonesia

Agung Satyadini presents his research about tax compliance in Indonesia.

This paper analyses the dynamic effects of interventions on small businesses' tax compliance in Indonesia. Specifically, it examines whether the deterrence intervention produce sustainable and long-lasting effects rather than just immediate outcomes compared to non-deterrence interventions. We estimate the long-term impact of these interventions and resend the initial treatment letters one year after our initial trials. Our findings show that deterrence letters lead to a significant increase in tax payment rates and have a more enduring impact on the likelihood of timely filing during the observation periods. Additionally, in our repeated experiments, we observe a significant reduction in the average treatment effects across all interventions; however, deterrence letters continue to substantially increase the likelihood of tax payment.