Dynamics of the Market for Corporate Tax‐Avoidance Advice*

Abstract

This paper addresses the current debate about mandatory disclosure rules for aggressive tax-planning models as a means to shorten regulatory delay. It focuses on the dynamic interaction of innovation and imitation of aggressive tax-planning products and governmental tax regulation and highlights the importance of the length of regulatory lag in comparison to the time it takes the tax-consulting industry to imitate newly innovated tax-avoidance products. It reveals synergies between highly innovative tax-consulting …rms and the governmental tax legislator/regulator. It suggests that innovative taxconsulting …rms may bene…t from governmental regulation and may actively try to inform and in ‡uence the regulator to shorten but not eliminate the regulatory delay.