Can Facebook Ads and Email Messages Increase Fiscal Capacity? Experimental Evidence from Venezuela

Tax compliance is an important challenge in weakly institutionalized countries, especially when fiscal capacity is limited. E-government platforms, which have become popular in recent years, provide governments with more and better taxpayer information, allowing new forms of communication with citizens. In particular, social media targeted advertising may be used by tax authorities to increase tax compliance. We performed a randomized field experiment in the capital of Venezuela, Caracas, to determine whether targeted Facebook ads help the local government reduce tax delinquency. Our design allows us to test for complementarities between ads and email reminders, which may boost the capacity of the tax authority to increase compliance. We find that these online strategies are cost-effective methods for increasing tax revenues but that the effects vary across different types of taxpayers, especially concerning the combined email and Facebook treatment.