DP13194 Shaming for Tax Enforcement: Evidence from a New Policy

Author(s): Nadja Dwenger, Lukas Treber
Publication Date: September 2018
Keyword(s): compliance, enforcement, penalty, shaming, social image concerns, tax debt
JEL(s): D1, H26, K34, K42, Z13
Programme Areas: Public Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13194

Can public shaming increase tax compliance through social pressure? Many tax authorities make ample use of public shaming. However, empirical evidence from outside the laboratory on how a new shaming law affects overall compliance is lacking. We provide the first evidence from the field, exploiting comprehensive administrative tax data and the introduction of a novel naming-and-shaming policy in Slovenia in 2012. The policy aims to reduce outstanding tax debt among the self-employed and corporations. Our empirical strategy exploits the variation across taxpayers in ex ante exposure to the shaming policy. We find that taxpayers reduce their tax debt by 8.5% to avoid shaming, particularly in industries where reputational concerns are likely to be important. The publication of the first naming-and-shaming list further reduces tax debt among shamed taxpayers because of social learning. This effect, however, is marginal in terms of revenue and tapers off quickly.