Social pressure or punishment? Using behavioural insights for compliance


There are a range of behavioural insights tools that can help improve compliance, whether for compulsory activities like tax, or voluntary ones like reducing energy consumption.

For policymakers wanting to use behavioural insights to improve compliance, “investing in longer-term development of social norms may be the best course”, argues an evidence review published by the Australia and New Zealand School of Government.

There are nonetheless a range of approaches, such as punishment, rewards and better information, that can be useful, depending on the situation — and policymakers need to be careful not to use such interventions in counterproductive ways.

The paper examines previous studies targeting behavioural change in compulsory and non-compulsory contexts — tax compliance and energy use, respectively.

It found that playing to social norms, punishment, improving access to professional advice and increasing public information could all be effective at pushing citizens towards desired behaviours. Offering rewards can be effective in non-compulsory contexts, but studies show it is not useful in ensuring tax compliance.

The authors, University College London’s Peter John and University of Greenwich’s Jane Robb, argue that social norms have a significant effect on behaviour change across both compulsory and non-compulsory fields.

“Therefore, if policymakers wish to change behaviour, investing in longer-term development of social norms may be the best course. This could be especially important for consideration of future changes in law,” they state.

“For instance, with climate change becoming an increasingly important issue for governments and public, changing social norms around energy use is currently in the public interest, but may well be an area that becomes law in the future in order to help governments reach their emissions targets. If this were to happen, the development of social norms pre-legislature could increase the likelihood of effective compliance.”

Going with the herd

Using social norms — for example by telling taxpayers how many of their neighbours pay on time — can be a very useful way to lift both compliance rates on compulsory activities like tax and for behavioural change such as using less energy. Telling someone who mistakenly believes few others fully comply with tax requirements the real rate of compliance can improve behaviour as well.

It’s not completely straightforward, however: excessive social shaming can lead to reduced compliance, while exposure to social norms can lead to the same for certain social groups. One study, which posted out two types of letter with varying normative appeals to taxpayers, found that while there were no statistically significant treatment effects for the whole group, there were significant positive effects for some population sub-groups, including upper middle class taxpayers. On the other hand, the letters had a negative effect on tax compliance for those in the highest income bracket.

People who use tax agents tend to have higher levels of compliance. Making professional information readily available also improved outcomes. On the non-compulsory side, giving citizens ongoing information about their energy use made it more likely they would cut down on consumption.

The more uncertainty there is around whether someone will be audited, the more likely they are to comply on their tax. Actually auditing someone can lead to decreased compliance in subsequent years, however, as people will often believe this means they are unlikely to be audited again for a while. On a broader level, widespread auditing can also have a negative impact. Treating everyone as a potential evader can erode compliance.

While offering rewards for tax compliance doesn’t appear to be effective (and is problematic given that people should probably not be rewarded for doing something they are legally required to do), things like rewards, discounts and incentives can improve energy consumption outcomes. And it’s not just about nudging people towards behaviour that has a public benefit — they can be useful in encouraging people to behave in ways that are in their own personal long-term interests, such as investing money now in insulation that will save money and energy down the track.

The essay breaks down findings by intervention type. John and Robb sum up the evidence thus:

Social norms

  • Communicating positive social norms to individuals has a positive effect on tax compliance.
  • Using reference groups that individuals relate to is effective at encouraging individuals to undertake new compliant behaviours.
  • Challenging and contradicting misperceived social norms has a positive effect on tax compliance.
  • Using central figures within social networks is a good way to help disseminate information on positive social norms and challenge perceived social norms.
  • Stigmatisation of past offenders may decrease tax compliance.
  • Public shaming without successive reintegration may decrease tax compliance.

Professional advice and increased public information

  • Providing easy access to professional services for taxpayers increases tax compliance.
  • Communicating timely advice on energy consumption produces long-term reductions in usage.
  • Home monitors and other feedback mechanisms provide significant reductions in home energy use.
  • Personalising contact has a positive effect on compliance.
  • Allowing taxpayers to indicate where they would like their tax to go, and communicating government strategies, have positive impacts on tax compliance.
  • Messaging has a positive effect on increasing compliance with payment of fines.

Punishment

  • Increasing uncertainty of audit increases tax compliance.
  • Increased punishment can lead to decreased tax compliance.

Rewards

  • Rewarding compliance has little overall effect on tax compliance.
  • Many discount or reward schemes are effective for reducing energy consumption.