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Evaluation of an intervention to increase online filing of individuals’ tax returnsPeter LumbSeptember 2009
SA316 online filing pilot | September 2009 | 2
Contents
• Self Assessment
• SA316 pilot
• Summary results
• Logistic regression to predict adoption of online filing
• Summary and Conclusions
SA316 online filing pilot | September 2009 | 3
Self Assessment – key facts
• Income Tax returns for Individuals, Partnerships and Trusts
• 9.6 million returns for 2007/08
• HMRC has had targets for increasing electronic filing for several years
• For tax year 2007/08, 69% of returns filed by 31 Jan 2009 deadline were by Internet
• Internet filing saves administrative costs and is liked by the taxpayers who use it
SA316 online filing pilot | September 2009 | 4
Self Assessment: how taxpayers are asked to file
• Customers who previously filed on paper normally sent a paper return and guidance. Two types of paper return:
• Short tax return (STR) (four sides A4 paper plus guidance)
• Full/ main tax return: for more complex affairs/ income sources: longer with supplementary schedules for infrequent income types
• Customers who previously filed by online or through an advisor/ accountant sent a 2 side letter: Notice to Complete a return (SA316 form)
• SA316 is not a tax return itself. Advises customers how to file online or via a tax agent, or otherwise contact HMRC for a paper form.
SA316 online filing pilot | September 2009 | 5
SA316 pilot
• Research question: Does sending an SA316 – instead of a paper return and associated guidance – to unrepresented taxpayers previously filing on paper encourage online filing?
• Pilot group: 10,000 individuals who filed on paper for 2005/06: send SA316 notice for 2006/07 tax year – instead of paper return
• Control group: a further 1,000 taxpayers
• Selected from one office for practical reasons
SA316 online filing pilot | September 2009 | 6
Summary results
• Filing method of taxpayers in pilot and control groups for 2006/07 analysed
• Analysed separately for people sent a Short tax return and those sent a full/main tax return for previous year (2005/06)
SA316 online filing pilot | September 2009 | 7
Short tax return filers (2005/06) – filing for 2006/07
Control group Pilot group
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Full return Short return Internet Very late orno filing
Other
SA316 online filing pilot | September 2009 | 8
Full return filers (2005/06) – filing for 2006/07
Control group Pilot group
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Full return Short return Internet Very late orno filing
Other
SA316 online filing pilot | September 2009 | 9
Logistic regression: to predict switching to online filing
• Aim:
• To gain a better understanding of factors associated with adopting online filing
• To build a statistical predictive model that can be used to target taxpayers most likely to adopt online fling
• Process:
• Exploratory analysis
• Model building and results
SA316 online filing pilot | September 2009 | 10
Adoption of online filing: previous year’s return type
0%
10%
20%
30%
Control Pilot
Short return Full return Short return Full return
SA316 online filing pilot | September 2009 | 11
Adoption of online filing: male/female, control/pilot splits
0%
10%
20%
30%
Control Pilot
Male Female Male Female
SA316 online filing pilot | September 2009 | 12
Adoption of online filing: employee and control/pilot
0%
10%
20%
30%
Control Pilot
Employee not Employee Employee not Employee
SA316 online filing pilot | September 2009 | 13
Adoption of online filing: employee (directors only)
0%
10%
20%
30%
Control Pilot
Director Not director Director Not director
SA316 online filing pilot | September 2009 | 14
Adoption of online filing: self employed (sole trade)
0%
10%
20%
30%
Control Pilot
Sole trader Not trader Sole trader Not trader
SA316 online filing pilot | September 2009 | 15
Adoption of online filing: land and property income
0%
10%
20%
30%
Control Pilot
Landlord Not Landlord Landlord Not Landlord
SA316 online filing pilot | September 2009 | 16
Adoption of online filing: free software applicable
0%
10%
20%
30%
Control Pilot
No Yes No Yes
SA316 online filing pilot | September 2009 | 17
Adoption of online filing: Financial Strategy Segments
0%
10%
20%
30%
40%
A - Suc
cess
ful S
tart
B - Hap
py H
ouse
mat
es
C -
Survi
ving
Sin
gles
D -
On
the
Bread
Lin
e
E - Fl
ouris
hing
Fam
ilies
F - C
redi
t-hun
gry
Fam
ilies
G -
Gilt-
edge
d Li
fest
yles
H -
Mid
-life
Affl
uenc
e
I - M
odes
t Mid
-yea
rs
J - A
dvan
cing
Sta
tus
K - Age
ing
Wor
kers
L - W
ealth
y Ret
irem
ent
M -
Elder
ly Dep
rivat
ion
Not
cla
ssifie
d
Not
mat
ched
SA316 online filing pilot | September 2009 | 18
Adoption of online filing: Marital Status
0%
10%
20%
30%
40%
Control Pilot
Sin
gle
Ma
rrie
d
Div
orce
d/ S
epa
rate
d
Wid
ow
ed
Not
ava
ilab
le
Sin
gle
Ma
rrie
d
Div
orce
d/ S
epa
rate
d
Wid
ow
ed
Not
ava
ilab
le
SA316 online filing pilot | September 2009 | 19
Adoption of online filing: previous year’s filing date
30 Sept. filing deadline
0.0
0.2
0.4
0.6
0.8
1.0
31 May 06 30 Sep 06 31 Jan 07
SA316 online filing pilot | September 2009 | 20
Adoption of online filing: Age and Sex
0.0
0.5
1.0
20 40 60 80 100 20 40 60 80 100
Control Pilot
Male Female
SA316 online filing pilot | September 2009 | 21
Adoption of online filing: Income
0.0
0.5
1.0
0 10 40 100 200 350 0 10 40 100 200 350
Control Pilot
Income (000s) (square root scale)
SA316 online filing pilot | September 2009 | 22
Logistic regression: model
• Good fit achieved • (Hosmer-Lemeshow statistic p value 0.92)• Good predictive capability
SA316 online filing pilot | September 2009 | 23
Predicted probabilities by age, control and pilot groups
0.0
0.2
0.4
0.6
0.8
20 30 40 50 60 70 80 90
Full return in 2005/06
0.0
0.2
0.4
0.6
0.8
20 30 40 50 60 70 80 90
Short return in 2005/06
SA316 online filing pilot | September 2009 | 24
Model performance
0
0.1
0.2
0.3
0.4
0.5
0.6
1 2 3 4 5 6 7 8 9 10
Taxpayers ordered by predicted likelihood of switching to online filing (deciles)
Overall proportion switching
SA316 online filing pilot | September 2009 | 25
Logistic regression: key results – on adoption of online filing – pilot group
• Pilot cases that could use HMRC software – 4.2 times more likely
• Employees in pilot group – 2.6 times more likely
• Both employee and HMRC software applicability – 10.9 times more likely
• Directors less likely to switch than other employees
SA316 online filing pilot | September 2009 | 26
Logistic regression: key results – on adoption of online filing – control group
• Pilot cases that could use HMRC software in control group – about half as likely as other control group cases
• Employees in control group – about half as likely
• Both employee and can use HMRC software – around a quarter as likely to adopt online filing as other customers in control group
SA316 online filing pilot | September 2009 | 27
Logistic regression: key results – on adoption of online filing – all customers (both pilot and control)
• Single and also divorced/separated individuals – less likely to switch
• Men slightly more likely than women to switch to online filing, depending on return type
• Some Financial Strategies Segments – less likely
• For each additional year of age over about 40: up to 5.5% decline in probability of filing online
• Increasing take-up with income
SA316 online filing pilot | September 2009 | 28
Summary and conclusions (1)
• Pilot highly effective for some types of taxpayer – some groups ten times more likely to adopt online filing
• Less impact for taxpayers with more complex affairs – such taxpayers more likely to take on an agent who may often file online on taxpayers behalf (irrespective of pilot/ control)
SA316 online filing pilot | September 2009 | 29
Summary and conclusions: future directions (2)
• Model could be used for future targeted exercises to encourage online filing
• Potential benefit of lower costs, better overall customer satisfaction and less risk of non-filing
• Potential to draw additional insights from application of behavioural economics insights
• Discussion on possible operational applications in HMRC’s work planned