The $100 Million Nudge : Increasing Tax Compliance of Firms Using a Natural Field Experiment

This paper uses a large-scale natural field experiment to examine the effectiveness of deterrence nudges on tax compliance in the Dominican Republic. In collaboration with the tax authority, we sent messages to 56,310 firms who collectively paid $800 million in the year before the experiment. We find that increasing the salience of prison sentences or the public disclosure of evasion increases tax revenue by $184 million (0.22% of GDP). Using a unique sample of large firms, we show that the largest firms, who pay 84% of all corporate income taxes, are considerably more responsive to nudges than typically-studied smaller firms