Abstract
The aim of this study is to investigate how behavioural nudges affect income reporting behaviour around statutory tax thresholds, with a particular focus on income bunching among individual taxpayers in Indonesia. Using a large-scale randomised controlled trial, the intervention delivers targeted informational (social norms and public goods provision) and deterrence-based emails to around 850,000 taxpayers whose reported income lies close to the threshold that triggers higher tax obligations.
The results show that behavioural nudges significantly reduce excess bunching below the threshold. Taxpayers in the treatment groups are less likely to report income just below the cutoff relative to the control group. The deterrence-based message generates the largest immediate effect, while norm-based messages produce more persistent behavioural adjustments over subsequent filing periods. We also observe a modest upward shift in reported taxable income among treated taxpayers, suggesting partial correction of strategic underreporting rather than real income changes.
The analysis further indicates heterogeneous effects: responses are stronger among first-time filers and taxpayers without prior audit experience, while effects attenuate among individuals with repeated exposure to the threshold. Overall, the findings provide evidence that low-cost behavioural interventions can meaningfully reduce threshold-driven reporting distortions and improve tax compliance at scale