The power of marketing in voluntary tax compliance: strategies for sustainable success

On November 6, 2024, 9:32 AM

As Governments worldwide strive to improve tax revenue collection, voluntary tax compliance has emerged as a critical factor in achieving this goal. Marketing, often overlooked in the tax administration realm, plays a vital role in encouraging taxpayers to comply willingly.

This article explores the relevance of marketing in voluntary tax compliance and highlights effective strategies for tax authorities such as the Ghana Revenue Authority (GRA), and other African tax agencies to adopt.

Why marketing matters

Voluntary tax compliance largely relies on taxpayers’ willingness to fulfill their obligations without coercion. Marketing as a public sector tool comes in handy to help tax authorities to be able to:

Build trust and credibility
Educate taxpayers on tax laws and benefits
Foster a sense of responsibility and civic duty
Address taxpayers’ critical concerns and perceptions.

Some common and low-cost strategies that African tax agencies can deploy to ensure Effective Marketing in their tax administration include:

Segmentation: Identify and target specific taxpayer groups such as large taxpayers, individuals, small businesses, and corporations with tailored messages to ensure seamless relationships with the taxpayers.
Clear Messaging: Tax agencies should use simple, concise language to explain tax laws, the benefits of paying taxes, and the consequences of tax evasion by law.
Multi-Channel Communication: Tax agencies must leverage various media channels such as social media, email, print, radio, TV and even face-face to reach to diverse audiences.
Taxpayer Education: Tax agencies ought to develop interactive resources such as workshops, webinars, infographics etc, to enhance tax literacy among taxpayers.
Incentives and Recognition: Tax agencies like the GRA can set aside special reward fund to reward and recognize compliant taxpayers to encourage others to follow suite.
Collaboration: Tax agencies should partner with tax professionals, industry associations, faith-based organizations, opinion and community leaders to amplify voluntary tax compliance messages.
Feedback Mechanisms: Establish channels for taxpayers to provide input and suggestions at every touchpoint of the tax agency.
Digital Services: Tax agencies should offer convenient online services such as the Electronic Invoicing of Value Added Tax (E-VAT), e-filing such as the Ghana.gov platform, and other payment portals to reduce compliance barriers.

If one can observe critically, the GRA has been exceeding its revenue targets since 2019 when it started deploying effective marketing strategies such as tax education, digital services, collaboration, and feedback mechanisms.

The same thing can be said of other African tax agencies such as the South African Tax Ombudsman and the Kenya’s Revenue Authority (KRA) collaborative efforts with tax professionals, boosted their voluntary compliance, as well the Australia’s Tax Organization (ATO) targeted marketing approach increased their tax compliance among small businesses.

By embracing marketing’s potential, tax authorities can create a culture of voluntary compliance, benefiting both Governments and taxpayers alike by allocating dedicated resources for marketing and taxpayer education, conducting regular taxpayer surveys to inform marketing strategies, fostering inter-agency collaboration to amplify messages, and continuously evaluate and refine their marketing approaches.

How to measure marketing effectiveness in tax administration

It is imperative for tax administrations to measure how effective their marketing strategies are performing, so as to influence future policy decisions. This can be done by deploying various metrics whether quantitative or qualitative.

Some effective quantitative metrics recommended in measuring marketing effectiveness in tax administration are:

Taxpayer registration and compliance rates
Revenue collection growth
Conversion rates (e.g., number of taxpayers who file online)
Cost per Acquisition (CPA) analysis (How much does it cost the tax agency like GRA to collect tax)

Other qualitative metrics that can be deployed in measuring marketing effectiveness in tax administration include:

Conducting taxpayer satisfaction surveys
Net Promoter Score (NPS)
Focus group discussions (In the form of stakeholder engagements)
Taxpayers feedback and perceptions index
And sometimes measuring the brand reputation of the tax agency (GRA)

It’s important to advise that it will be difficult, if not impossible, for tax administrations to measure their effectiveness without outlining some measurable Key Performance Indicators (KPIs).

Some KPIs tax administrations can consider include:

Increase in voluntary tax compliance rate
Reduction in tax gap
Improvement in taxpayer education and awareness
Enhanced taxpayer experience

There are Tax-Specific Metrics (TSMs), that various tax administrations have to set, when using marketing as a tool for voluntary compliance. This TSMs facilitates the evaluation of the strategies deployed. Some common TSMs applied by tax administrations include Tax Education Index (TEI), Tax Compliance Rate (TCR), Tax Gap Ratio (TGR), and Voluntary Compliance Rate (VCR).

Benchmarking which is a marketing tool also come important as it highlights or test the strategic or metric health of the tax administration. How does this work?

The tax administration through the department responsible will have to Compare metrics with previous periods or campaigns, Compare with industry benchmarks (e.g., other tax administrations), and Conduct A/B testing for marketing campaigns (Tax education campaigns, E-VAT campaign etc.).

In this 4^th industrial revolution, the deployment of AI and other digital tools are essential part of marketing. Some of these tools and techniques creates convenience for customer feedback, and ensuring a seamless and real-time monitoring of marketing programs that triggers trust, and thereby increasing the rate of voluntary tax compliance. Although tax is a creature of law, the harmonization of law, technology and customer service creates the magic. Some common tools and techniques available for tax administrations to leverage on in the voluntary tax compliance value chain include:

Google Analytics
Social media analytics tools (e.g., Hootsuite, Sprout Social)
Email marketing software (e.g., Mailchimp, Constant Contact)
Survey tools (e.g., SurveyMonkey, Qualtrics)
Data visualization tools (e.g., Tableau, Power BI)

For tax administrations to perpetually meet their revenue targets, and increase their voluntary tax compliance rate, they must find a gentle blend of enforcement, and investment in marketing.

It is important to highlight, that regular evaluation and reporting of marketing performance is essential. A quarterly marketing performance report is necessary, as that will lead to an annual evaluation of the effectiveness of the marketing strategy. Tax administrations must therefore ensure the continuous monitoring and adjustment of their marketing campaign, in order to guarantee alignment with the various strategic pillars of the tax agency.

By tracking these metrics and KPIs as earlier elaborated, tax administrations can assess the effectiveness of their marketing efforts and make data-driven decisions to optimize their strategies.

As I sign-off, it is important to indicate, that Marketing is a crucial component of voluntary tax compliance. By implementing targeted strategies, tax authorities can increase taxpayer awareness, trust, and willingness to comply. As Governments continue to seek innovative solutions to improve tax revenue collection, the power of marketing should not be overlooked.

The writer is a Chartered Marketer, a tax worker, & a Marketing Consultant with over 10 years of experience in the Service Industry, with a particular interest in Public Sector & Tax Marketing. He can be reached via cbeyereh@gmail.com or +233205366152

Story By Christopher K. Beyereh