with information about their revenues available to the tax authority were more likely to file taxes (+ 2.3 p.p.) and declared higher gross revenue (+ L103,000<sup>3</sup> or 8% of the control mean). The increase in gross revenues, nonetheless, was accompanied by an increase in claimed deductions (+ L92,000) resulting in a modest increase in taxable income (L10,000 or 11% of the control mean). The offsetting increase in deductions is consistent with previous findings from Carrillo et al. (2017) in a similar setting in Ecuador.

The finding of significant impact only for taxpayers with lower perceived risk-level is contrary to what the experts we surveyed expected. As previously mentioned, it is also at odds with the current practice of the tax authority, which focuses communication interventions on medium- and high-risk taxpayers. Using the causal forest model, we predict treatment effects conditional on observed covariates for all taxpayers and show a similar finding: the correlation between (conditional) treatment effects and a continuous measure of risk-level assessed by the tax authority is negative and the average treatment effect across taxpayers is only positive for those in the low- and medium-low risk groups.

These results suggest that, while models to predict risk of non-compliance are an important tool for tax authorities, they are not sufficient to determine targeting. Governments face a menu of policy tools to assure compliance, ranging from "soft" communication encouraging truthful reporting to "hard" audits. Experimental evidence on the causal impact of different tools for distinct groups of taxpayers can help governments tailor interventions to maximize impact.

One important caveat, discussed in more detail throughout the paper, is that our intervention happened at the onset of the Covid-19 crisis in Honduras. Two weeks after we contacted taxpayers, the country entered a severe lock-down that depressed economic activity and the filing deadline for income taxes was twice postponed. These facts suggest that the intervention was likely much less salient in the mind of taxpayers. Furthermore, compliance in general was clearly affected by the crisis; 86% of taxpayers in our sample filed taxes in 2019 but only 62% did in 2020. This implies that the external validity of our findings should be taken with caution.

Our study contributes to the now large literature on communication interventions aimed at increasing taxpayers compliance, reviewed by Mascagni (2018) and Hallsworth (2014)<sup>4</sup> . Our experiment is particularly informative about exploring third-party information in communication interventions, similar to the work of Brockmeyer et al. (2019) in Costa Rica and Carrillo et al. (2017) in Ecuador. In addition to informing taxpayers about SAR’s knowledge of their transactions, we also randomly vary how we frame the importance of compliance. One third of the treatment group was reminded that non-compliance carries monetary penalties; one third was reminded that SAR can deny

> 3Approximately USD 4,000.

> 4For recent studies on similar interventions in low-income countries, see for example Collin et al. (2021), Cohen (2020), Okunogbe (2021) and Hoy et al. (2021).

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