Based on the Harvard Course Pack: Behavioral Insights Team (A), here are the answers to your questions:

In my last year in APU, I have been living on my allowance, and I have had to lower my monthly spending
to meet some of my tuition payment. Without doing extra part-time jobs, my monthly costs tend to be
on the low side, making it difficult to balance my expenses for my personal life and maintain my focus on
pursuing my academic goals.

In the future, I would continue to pursue my studies even further in the field of management and
finances after having an adequate experience by working overseas for 2-3 years in companies that are
related to my future study plan, such as consulting company1. What should HMRC write in its letter to
delinquent taxpayers? Why do you think your proposal would be effective? What alternatives did you
consider?

In its letter to delinquent taxpayers, HMRC should consider incorporating behavioral insights to increase
the effectiveness of the communication. The following elements can be included:

a. Personalization: The letter should address the taxpayer by name and include specific information
about their outstanding tax obligations. Personalization creates a sense of individual responsibility and
increases the likelihood of a response.

b. Social norms: The letter should highlight that the majority of taxpayers in their local area or income
group have paid their taxes on time. This appeals to the desire to conform to social norms and
encourages the delinquent taxpayer to do the same.

c. Simplified messaging: The letter should use clear and concise language, avoiding jargon or complex
terminology. Simplified messaging helps individuals understand their obligations and makes it easier for
them to take action.

d. Salient deadlines: The letter should clearly state a deadline for payment or response. Presenting a
specific date creates a sense of urgency and reduces the likelihood of procrastination.

e. Offering assistance: The letter should provide information on available support and assistance options,
such as helpline numbers or online resources. This helps taxpayers who may be facing difficulties in
meeting their obligations.

These proposals are effective because they leverage behavioral insights to influence taxpayer behavior.
They tap into psychological factors such as social norms, personalization, and simplification, which have
been shown to have a positive impact on compliance rates in various contexts.

Alternative approaches that could be considered include:

- Using loss aversion: The letter could emphasize the consequences of non-payment, highlighting the
potential penalties, fines, or legal actions that may result from continued non-compliance.

- Framing options: The letter could present payment options in a way that highlights the benefits of
taking immediate action, such as avoiding additional interest or charges.
2. How should HMRC evaluate the success of your proposed letter? What factors should they take into
account?

HMRC should evaluate the success of the proposed letter by considering several factors:

a. Response rate: The percentage of delinquent taxpayers who respond to the letter by making a
payment or engaging with the provided assistance options.

b. Payment compliance: The proportion of delinquent taxpayers who fully or partially settle their
outstanding tax obligations within the specified timeframe.

c. Timeliness: The speed at which delinquent taxpayers take action after receiving the letter. Faster
responses indicate greater effectiveness.

d. Cost-effectiveness: Assessing the cost of sending the personalized letters and comparing it to the
additional revenue collected from delinquent taxpayers. This ensures that the intervention is
economically viable.

e. Qualitative feedback: Gathering feedback through surveys or interviews to understand taxpayers'

perceptions of the letter, including clarity of information, helpfulness of provided options, and overall
user experience.

By evaluating these factors, HMRC can determine the effectiveness of the proposed letter and make
data-driven decisions on whether to refine the approach or scale it up.

3. Step back from the context of HMRC. Suppose instead that a credit card company were sending a
letter asking people to pay their overdue account balances. How, if at all, should that letter differ from
the one sent by HMRC?

If a credit card company were sending a letter asking people to pay their overdue account balances,
there are a few ways the letter might differ from the one sent by HMRC:

a. Tone and messaging: The credit card company's letter may adopt a more customer-centric tone,
emphasizing the benefits of resolving the outstanding balance, such as maintaining a good credit score
or avoiding additional interest charges. The messaging could focus on the value provided by the credit
card company and how paying the balance aligns with the customer's financial well-being.

b. Offer of payment plans: Unlike the HMRC letter, which primarily aims for full payment, the credit card
company might consider offering flexible payment plans or options to help customers gradually settle
their debts. This recognizes the financial constraints that individuals may face and provides a more
feasible path to repayment.
c. Incentives or rewards: To encourage prompt payment, the credit card company might consider offering
incentives, such as waiving late fees or providing small rewards or discounts upon successful payment.
This leverages behavioral principles like immediate gratification and positive reinforcement.

d. Contact information: The letter should prominently display the credit card company's contact
information, including customer service helpline numbers or online portals. This facilitates easy
communication and allows customers to seek clarification or discuss payment arrangements.

The credit card company's letter should still incorporate behavioral insights, such as personalization,
simplified messaging, and salient deadlines, to increase its effectiveness in encouraging payment and
promoting responsible financial behavior.