Pecuniary and Non-Pecuniary Motivations for Tax Compliance: Evidence from Pakistan
We examine two Pakistani programs to explore the role of deterrence as well as social and psychological factors in the tax compliance behavior of agents. In the first of these programs, the government began revealing income tax paid by every taxpayer in the country. The second program publicly recognizes and rewards the top 100 tax paying corporations, partnerships, self-employed individuals, and wage-earners. We find that both public disclosure and social recognition of top taxpayers caused a substantial increase in tax payments. We explore the drivers of this behavior, including the shift of social norms toward compliance.
Helpful comments on an earlier draft were received from participants at seminars at the Bank of Mexico, the University of Michigan, the University of Manchester, Harvard University, the University of Munich, ETH Zurich, and the University of Zurich. Usama Jamal provided outstanding research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.