A study by a researcher at the Naveen Jindal School of Management has found that governments frequently offer amnesties as a strategy to boost tax revenue, allowing debtors to partially settle their dues in return for prompt payments or disclosing hidden assets.

Study author Dr. Alejandro Zentner, associate professor of finance and managerial economics in the Naveen Jindal School of Management, and his colleagues found that beliefs about enforcement of taxes owed are a barrier to repayment, particularly for larger companies, and that amnesties – allowing debtors to make amends for past misdeeds in exchange for partial debt forgiveness – can be an important tool to generate greater tax revenues.

Zentner said amnesties have existed since ancient times.

“Not many people know that the central conciliatory message inscribed on the Rosetta Stone, an artifact that was key in deciphering Egyptian hieroglyphs, actually contains the roots of a popular instrument used by tax authorities today: tax amnesties,” said Zentner, adding that state governments in the U.S. have implemented tax amnesties 46 times since 2010.

The working paper, published online by the National Bureau of Economic Research (NBER) in May, explored whether amnesties work and, if so, for whom and why. Other co-authors of the study were Patricia Gil, the chief research economist of the Dominican Republic Internal Revenue Service, and Dr. Justin Holz, Dr. John List and Dr. Andrew Simon from the University of Chicago.

In October 2020 the researchers partnered with the Dominican Republic Tax Authority to implement a field experiment. Correspondence was sent to more than 125,000 taxpayers – both individuals and companies – who collectively owed $5.2 billion in known tax debt.

A control group received no direct message from the tax authority. The other taxpayers received one of four messages:

• A message reminding them about the amnesty program and the rules for joining.


• A message highlighting the need for critical tax revenue for the country in the context of the COVID-19 crisis.


• A message suggesting that future amnesties are unlikely.


• A message reminding them that the failure to pay a tax debt can be penalized with a prison sentence.

Each of the four messages increased the likelihood of a taxpaying entity paying both known and hidden debts; however, only the message highlighting the potential prison sentence increased the average amount of debt paid. That message increased payments of known debt by 25% and hidden debts by 48%, with larger firms responding more strongly.

Zentner said the results suggest that amnesties are most effective for increasing revenue when combined with strict enforcement.

“Our experiment shows how simple messages can have a large impact on behavior,” Zentner said. “That the wording of our most effective message includes harsh punishment consequences of evasion may provide a signal to taxpayers that the tax authority proposes amnesty as a transition to a stricter enforcement regime.

“In this way, taxpayers can view joining the amnesty as biting the carrot to avoid the stick.”

Altogether, only 18% of the eligible debtors joined the tax amnesty program. Those who received any of the four messages collectively paid back $22 million more debt than did those in the control group.

By offering amnesty, the Dominican Republic collected $263 million — 5% of the total known debts owed.

“Beyond raising millions of dollars in tax revenue for a developing country, our results show that large taxpayers are more responsive to our nudges,” Zentner said. “This is important, because large taxpayers pay the lion’s share of all taxes. In the Dominican Republic, the top 1% of the taxpayers based on size owe 87% of the tax debt.”

“First, refuse free stuff that you know you’re never going to use,” she said. “Second, reduce, that is, eliminate or lower unnecessary consumption. Third, reuse products either for their original purpose or some creative new function, and fourth, recycle. That one is a last resort. If I end up recycling, it’s because I failed at doing the first three things.”