Pecuniary and Non-Pecuniary Motivations in Tax Compliance: Evidence from Pakistan

We examine two Pakistani programs to explore the extent to which deterrence, as well as social and psychological factors, play a meaningful role in the compliance behavior of agents. In the first of these programs, the government began publishing online the income tax liability reported by every taxpayer in the country. The second program publicly recognizes and rewards the top 100 tax paying corporations, partnerships, self-employed individuals, and wage-earners in the country. We find that both programs induced a significant compliance response. The public disclosure caused a 9 log point increase in tax liability and 2 log point increase in tax filing by agents exposed to the program. The social recognition of top taxpayers caused a further 17 log point increase in the tax liability reported by the treated agents.