The Office of State Revenue (OSR) is a division of the Office of Finance and Services, located within NSW Treasury. OSR is responsible for the administration of taxation and revenue programs in NSW. It collects tax revenue, resolves fines, debts and administers various grants and subsidies.
We started working with the Behavioural Insights Unit (BIU) to increase the compliance effectiveness with respect to our fines, tax and debt recovery businesses. We conducted various trials to robustly understand the value of BI, one of which was for our land tax legal notices. Here are the details of the trial.
Land Tax Legal Notice Trial
Land tax legal notices are notices that are issued by OSR when taxpayers repeatedly default on their land tax payments. It spells out the legal consequences of continued default.
Our land tax legal notice trial was subject to two phases: a trial and a roll out. In the trial we sent two versions of the letter, the original land tax legal notice (the control group) and a BI version of the same notice (the trial group). We then compared the results of the two in a randomised controlled trial. The control group consisted of 1,200 clients and the trial group consisted of 1,140 clients and ran from February to March 2013.
Below is a copy of our original land tax legal notice with BI suggestions.
What was novel with this particular notice was the introduction of a social norm. This told the reader that the majority of taxpayers pay their land tax on time. Another approach which was included was the use of personal language and highlighting salient consequences. The words “you” or “your” were introduced throughout the notice. This added a greater element of personal obligation to the reader and highlighted that any failure to pay tax was theirs and any subsequent consequences would personally affect them.
The results of the trial showed that we had an impact. In the trial the control group produced a result of 27% of clients paying on time as opposed to the BI group which resulted in 39% of clients paying on time.
After this trial we only issued the BI version of the notice (i.e. no control group was used). The second phase commenced on 12 March 2014 and concluded on 2 April 2014, involving 5,992 clients. Under the second phase the trial produced 34% of clients paying on time.
The trial was easy to implement and highly cost effective. We also understood the importance of testing BI techniques, rather than just rolling out the changes.
Our experience with BI over the past year and half has been highly positive and we have had similar success in other trials we have conducted. For example in:
1. A Land Tax Advertisement in newspapers
2. Penalty Notices (School Zones, Red Light Offences and Driver Nominations)
3. Penalty Reminder Notices (School Zones, Red Light Offences and Driver Nominations)
4. Enforcement Orders (failure to pay a fine), and
5. Time to Pay Orders (fine instalment notices) (with SMS messaging).
Being one the first agencies in NSW to conduct these types of trials, it was a privilege to provide guest speakers at the recent conference Behavioural Exchange 2014 and share our involvement with BI. We are now taking steps to embed BI practices internally as business as usual.