From SMS to graded e-mails, Govt’s tax ‘nudge’ makes a mark (60% of 1.11 crore respondents to I-T's compliance campaign were non-filers), Pg1

Key Highlights:

• The Income Tax Department's NUDGE campaign, designed to improve tax compliance, saw approximately 60% of 1.11 crore respondents being non-filers.
• NUDGE 2.0, which focused on foreign assets and income, generated about Rs 640 crore in additional revenue.
• The campaign led to a reduction of around Rs 1,750 crore in refund claims through revised returns.
• Overall, the exercise resulted in about Rs 8,800 crore of additional tax revenue over two years.
• The department is analyzing data to determine the most effective methods of "nudging," such as SMS, email, or e-verification.
• Taxpayers with incomes above Rs 12 lakh were specifically targeted through emails and SMS.
• The NUDGE campaign has evolved into SAKSHAM, a more comprehensive and scientific process for tax compliance.

Detailed Insights:

• The NUDGE campaign uses data analytics, behavioral insights, and digital messaging to encourage taxpayers to revise or update their returns.
• Unlike previous enforcement efforts, NUDGE is preventive, identifying erroneous refund or deduction claims before extensive scrutiny is required.
• The department analyzes taxpayer profiles based on factors like past compliance and tax liability to tailor communication methods.
• The campaign's success has prompted the evolution into SAKSHAM, which includes data compilation, research, targeted communication, and taxpayer support.
• The approach is inspired by behavioral economics, where subtle changes in communication can influence better decision-making.
• The UK implemented similar strategies in 2012, resulting in significant revenue increases from delinquent taxpayers.
• The department is focusing on taxpayers with incomes above a minimum threshold to maximize the impact of the campaign.

Key Concepts Involved:

• Tax Compliance: Adhering to tax laws and regulations by accurately reporting income and paying taxes on time.
• Data Analytics: Examining raw data to draw conclusions about information.
• Behavioral Insights: Understanding how people make decisions to design more effective policies and interventions.