It looks like threats don’t work anywhere near as well as nudges. Apparently HMRC has had the psychologists in, following mounting evidence that it’s possible to encourage people to change their behaviour by tweaking the traditional arguments used when communicating with them.
Subtle messages designed to ‘guilt-trip’ tax dodgers and late payers
The Chief Secretary to the Treasury, Danny Alexander, has revealed how the tax office has subtly changed the wording used in their reminder letters in an effort to gently ‘nudge’ foot-draggers into paying up, the idea being that a subtle nudge is usually much more powerful than a full-on telling off.
Hundreds of thousands of reminder letters have gone out, created with the help of a team of psychologists and behavioural economists. The idea is to make people feel guilty about not paying their tax on time. The new letters highlight how the majority of people pay on time as well as making the critical role our taxes pay in funding public services clear. The same kind of subtle approach is also being brought into play to target potential tax evaders, with letters asking them to clarify their tax affairs.
Is the approach too soft compared to letters sent to law-abiding taxpayers?
If you’re an ordinary, law-abiding small business owner who pays their tax on time, the new approach might seem a bit too soft if not actually unfair. After all, if you don’t pay your tax on time you get into trouble more or less straight away, whereas someone rich enough to stash cash in a foreign bank account gets a friendly, persuasive letter instead.
Thankfully there’s a sting in the tail. Take the 5000 so-called nudge letters already sent to people with Swiss bank accounts earlier this year, which asked politely for outstanding tax payments to be made but also made it very clear that non-responders will face a full tax enquiry.
An extra £210 million tax gathered so far…
The initiative appears to be working, with around £210 million worth of extra tax revenue coming HMRC’s way as a result. As Danny Alexander commented, “We are using psychologists and behavioural economists in HMRC to get the money quickly. Tax dodgers beware – we know where you live, we know how much you owe, and now we know how you think. Your behaviour is unacceptable, and we are coming for our money.”