This project measures the 'hassle costs' that keep individuals in Germany from filing a tax return even when filing would entitle them to a refund.
Using an incentivized field experiment, the project decomposes hassle costs into information search, information processing, and paperwork, and evaluates policies to reduce them and improve the effective progressivity of the tax system.
Administrative tasks such as filing taxes impose 'hassle costs' — costs of searching for information, understanding which rules apply, and completing paperwork — that can reduce access to government benefits and undermine the progressivity of the tax system. In Germany, about half of taxpayers are not required to file a tax return, and a large share of them forgo money they are owed by not filing.
We conduct an incentivized field experiment with a broad sample of German taxpayers for whom filing is optional. Participants' incentivized willingness-to-accept for filing their tax return provides a monetary measure of their perceived hassle costs. Randomizing which components of the filing process — information search, information processing, and paperwork — are removed for participants allows us to identify the relative importance of each component.
The results will (a) quantify how hassle costs vary across income and other socioeconomic groups, and (b) establish whether outreach and informational campaigns, simplified instructions and filing assistance, or pre-populated tax forms are most effective at reducing administrative burden.
