January 16th

is an American Economist, the Kenneth C. Griffin Distinguished Service Professor of Economics and Chairman in the Department of Economics at the University of Chicago. He also holds a position as a National Bureau of Economic Research Associate. John has previously served as a Senior Economist on the President's Council of Economic Advisers (2002-2004)

Taxation plays a central role in the development of states. While several coercive and incentive-based approaches have been used, little focus has been given by the government to use behavioral economics to increase tax compliance in developing economies. However, recently, Prof. John and his team partnered with the IRS in the Dominican Republic and experimentally evaluate how prison sentences and non-pecuniary motives influence tax compliance and provide the first empirical evidence using natural field experiment on whether increasing the salience of public disclosure of penalties affects tax compliance behavior in large firms. Moreover, in contrast to many earlier experiments on tax compliance, they leverage administrative data to shed insights into how behavioral nudges affect firms, which resulted in over 100 $ million tax revenue in Dominican Republic (DR).

Since Pakistan’s revenue performance has improved significantly from tax policy measures in recent years, rising from 9.5 percent of GDP in the financial year 2011-2012 to 12.9 percent in the financial year 2017-2018[1], it is still lower than the level needed by developing countries, of at least 15 percent of GDP, to fund basic government functions and provide services to people. As the country continues to face challenges and strive to improve the tax compliances and revenue collection; both at the individual and firm level, there is a dire need to acquire and use new means to encourage people and firms to pay taxes, enhance revenue mobilization and contribute towards national development. Hence, considering the significant results of John and his team's research, validated on empirical grounds, it is imperative to learn from this research and find, how Pakistan and its experts and policymakers can leverage behavioral economics to enhance tax compliance and increase revenue.

This policy talk will be administered by M&S Research Hub and Youth Advocacy Council in partnership with the Federal Board of Revenue, and will shed lights on key questions as follow:

1. What were the features of the applied field experiments and how much was the total allocated budget?
2. How this experiment was conducted in a natural environment at such a large scale? How the experiment(s) was/were performed?
3. What specific measures and messages were used by John and his team in partnership with IRS at DR? And can these strategies be used/modified to be employed by FBR in Pakistan?
4. How do institutional, cultural, and social practices can affect such experiments?
5. What key aspects should Pakistan and FBR consider when designing a similar experimental research framework?