Association for Public Policy Analysis & Management

The collection of unpaid tax debts is a significant challenge for tax authorities. We show that variation in the timing of a reminder letter has a theoretically ambiguous effect on payment behavior and test this in a field experiment in Australia with over 4,000 business taxpayers. We find that a simple reminder letter increases the probability of payment by about 25 percentage points relative to a control group receiving no contact from the tax authority. However, variation over a three-week period in the timing of the reminder letter had no effect on the probability of payment within seven weeks of the due date. Our findings indicate that sending reminder early results in faster payment of debts with no effect on the ultimate probability of payment.