Why the Canada Revenue Agency is using this simple tactic to get you to pay your taxes - Action News
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Why the Canada Revenue Agency is using this simple tactic to get you to pay your taxes

The Canada Revenue Agency says it's begun using carefully crafted messages as a way of increasing the likelihood that people who owe taxes will pay up.

CRA now using a behavioural economics tactic known as 'nudge theory' to get more people to pay up

After years of experimenting with language in its correspondence with the public, the CRA is now using an approach called 'nudging.' (Evan Mitsui/CBC)

When Kim Brooks opened her notice of assessment from the Canada Revenue Agency, she was surprised to see a seemingly random factoid printed in bold letters at the top of the page.

"Only one out of 10 individuals who owe tax do not pay on time," said the document.

Brooks took keen interest because she's a professor of tax law at Dalhousie University in Halifax. She said that simple message from the CRA is a classic example of a psychological manipulation known as "nudging."

"They want you to feel like in order to be a good citizen, you should do what your neighbours are doing and pay your taxes on time. It's a different kind of approach to getting greater compliance," said Brooks.

Kim Brooks, a professor of tax law, says there are many reasons why people feel compelled to pay their taxes, and it makes sense for the CRA to exploit those reasons as best it can (Blair Sanderson/CBC)

In an emailed statement to CBC News, the CRA said similar strategies are being tried by tax authorities around the world.

"The CRA has started employing different interventions that attempt to overcome the behavioural barriers that keep people from following through with their intentions, sometimes referred to as nudges."

'If you needed an organ transplant, would you have one?'

The U.K. government is best known for using these kinds of subtle language adjustments. Set up in 2010, a group of academics called the Behavioral Insights Team began working with different British bureaucracies in areas such as health, transportation, child care and tax collection.

In one example, the team discovered it could increase the number of registered organ donors by nearly a 100,000 over a single year if it posed this question to potential donors: "If you needed an organ transplant, would you have one? If so please help others."

Pretty please?

The CRA has been experimenting with language in its correspondence with the public for years, said Jonathan Farrar, an associate professor at Ryerson University in Toronto who specializes in taxpayer decision-making.

He points to a series of focus groups the CRA held in five different Canadian cities in 2011. It wanted to know if people who owed money were more likely to pay up if assessment notices had a friendlier tone. Some people in the focus group got the standard letters and others got ones that used the word "please" when asking people to get in touch with the CRA.

Cheap and effective

"What they gleaned from the focus groups was that if they used language that was more respectful, that was more likely to encourage people to pay their taxes on time," said Farrar.

The research also found improvements when people's options were more clearly spelled out. For instance, response rates were higher when people who owed taxes were specifically told they could pay in instalments rather than all at once.

"And it's a very low-cost way to do it," said Farrar. "It's just simply adding words or phrases to a form, so it affects a whole lot of people in a very low-cost way."

Farrar said the federal government's Privy Council Office set up a new research office in 2015 , inspired by the Behavioural Insights Team in the U.K. It's called the Innovation Hub.

It lists getting more women in the military, better response rates for Statistics Canada surveys and better rates of student loan repayment as some of its objectives.