Compliance costs caused by agency action? Empirical evidence and implications for tax compliance

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract -The compliance costs of private taxpayers are not only affected by the tax law itself but also by its implementation through the tax authorities. In this paper we analyze the effect of the tax authorities on the burden of complying with tax regulations. Using survey data of Belgian businesses and controlling for potential endogeneity, we find empirical evidence that tax authority behavior is an important cost driver. According to our estimate, a customer-unfriendly tax administration increases the average compliance costs by about 25 %. Our outcome has interesting implications for tax compliance research. First of all, taxpayer services do not only affect "soft" factors like fairness and trust, but also "hard" aspects like costs. Furthermore, there may be an inherent ability of the administration to "punish" non-cooperative businesses by increased costburdens. Terms of use: Documents in EconStor may

Tax Compliance Costs: A Review of Cost Burdens and Cost Structures

“…Tax Compliance Costs: A Review of Cost burdens and Cost Structures state income taxes and local income taxes, see Slemrod and blumenthal, 1996;Erard, 1997), the number and the understandability of tax regulations (Sawyer, 2011;Marcuss et al, 2013;Eichfelder and Kegels, 2014), the number of tax rates (e.g. for the VAT), tax exemptions, tax deductions and tax credits for certain situations (Sandford et al, 1981: p. 62;Slemrod, 1989;Wurts, 1995;DeLuca et al, 2005), the frequency of tax law changes (Rametse and Pope, 2002;Eichfelder, Kegels and Schorn, 2011), the frequency of tax payments (e.g.…”

Tax Compliance Costs: A Review of Cost Burdens and Cost Structures

“…Hudson and Godwin 2000, Verwaal 2000, Vaillancourt 2011, Eichfelder and Schorn 2012, Yilmaz and Coolidge 2014. However, Eichfelder and Kegels (2014) find evidence that a general customer orientation of administrative authorities should significantly reduce costs. Furthermore, the findings of Coolidge, Ilic, and Kisunko (2009) and Eichfelder and Schorn (2012) imply potential cost savings due to a higher demand for tax preparation services; tax deductibility or not for individuals or firms may be one driver of the demand for such services.…”

“…state income taxes and local income taxes, see Blumenthal 1996, Erard 1997), the number and the understandability of tax regulations (Sawyer 2011, Marcuss et al 2013, Eichfelder and Kegels 2014, the number of tax rates (e.g. for the VAT), tax exemptions, tax deductions and tax credits for certain situations (Sandford et al 1981, p. 62, Slemrod 1989, Wurts 1995, DeLuca et al 2005, the frequency of tax law changes (Rametse andPope 2002, Eichfelder, Kegels andSchorn 2011), the frequency of tax payments (e.g.…”

“…A second important cost driver is tax administration. This includes the customer-orientation of tax authorities (Alm et al 2010, Eichfelder, Kegels, and Schorn 2011, Eichfelder and Kegels 2014 encompassing the understandability of tax forms, the availability of official staff members, the reliability of administrative statements and suggestions, the appropriateness of compliance obligations, and the proportionality of audit processes.…”

“…The data of De Vil and , Joos and Kegels (2004), Janssen, Kegels, and Verschueren (2006) and has been documented and analyzed by Eichfelder and Kegels (2014) (estimate of . Note that Eichfelder and Kegels (2014) refer to the average of cost-per-revenue ratios and not -like Kegels (2010) and Kegels (2012) -to a ratio of averages. In addition, there were changes in the Belgian questionnaire overtime, which likewise affected cost measurement (Eichfelder 2013).…”