Tax Compliance in the Rental Housing Market: Evidence from a Field Experiment

We study rental income tax compliance using a large-scale randomized field experiment and register data with third-party information on the ownership of apartments. We analyze the responses of potential landlords to treatment letters notifying them of stricter tax enforcement, or providing simplifying information on filing practices for the rental income tax. We find that both types of letters caused an increase in the propensity to report rental income, with letters notifying landlords of the use of third-party information in tax enforcement having the strongest effect. Our research design also allows us to analyze different types of spillover effects in tax enforcement. We find an indication of positive reporting spillovers within the household, but do not find clear evidence of spillovers between landlords in local rental markets.