Details
Original language | English |
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Article number | 101294 |
Journal | Accounting, Organizations and Society |
Volume | 97 |
Early online date | 6 Aug 2021 |
Publication status | Published - Feb 2022 |
Abstract
Using a survey of tax auditors, we investigate which factors determine tax auditors' choice of negotiation strategies during tax audits and analyze the effect of their chosen strategy on audit outcomes. The results show that, compared to a cooperative auditor negotiation strategy, a competitive auditor negotiation strategy is associated with significantly higher additional assessed taxes. However, the competitive strategy is associated with a lower probability that the negotiation partners will reach an agreement. These findings indicate an advantage of combining competitive and cooperative tactics (i.e., using a “mixed strategy”). We find that although this mixed strategy does not lead to significantly fewer additional taxes, it results in a higher agreement probability. Moreover, we show that the probability of using a mixed strategy increases with audit expertise and time pressure, whereas the use of a competitive (cooperative) strategy increases with the availability of higher authority (the quality of the taxpayer's financial accounting system) and a perceived competitive (cooperative or mixed) negotiation strategy of the tax advisor. In sum, our study provides new insights into how firms' tax burden is affected by negotiations between tax auditors and firms' tax advisors. The way these negotiations affect firms' tax burden is relevant for both tax policy and firms.
Keywords
- Negotiation strategies, Tax audit, Tax avoidance, Tax compliance
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Accounting
- Social Sciences(all)
- Sociology and Political Science
- Business, Management and Accounting(all)
- Organizational Behavior and Human Resource Management
- Decision Sciences(all)
- Information Systems and Management
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In: Accounting, Organizations and Society, Vol. 97, 101294, 02.2022.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Negotiating with the tax auditor
T2 - Determinants of tax auditors' negotiation strategy choice and the effect on firms’ tax adjustments
AU - Blaufus, Kay
AU - Lorenz, Daniela
AU - Milde, Michael
AU - Peuthert, Benjamin
AU - Schwäbe, Alexander N.
N1 - Funding Information: We thank Mark Peecher (editor), two anonymous reviewers, Jonathan Feinstein, Ulfert Gronewold, Jost Heckemeyer, Dirk Kiesewetter, Rainer Niemann, Renate Ortlieb, Deborah Schanz, Georg Schneider, and seminar participants at the Free University of Berlin, Leibniz University Hanover, LMU Munich, the University of Graz, the 2015 Tax Controversy Conference, the 2017 MaTax Conference, and the 2018 German Academic Association for Business Research (VHB) Annual Meeting for helpful comments and suggestions, and the Audit Department of the Senate Department of Finance in Berlin for the permission to conduct the survey among tax auditors.
PY - 2022/2
Y1 - 2022/2
N2 - Using a survey of tax auditors, we investigate which factors determine tax auditors' choice of negotiation strategies during tax audits and analyze the effect of their chosen strategy on audit outcomes. The results show that, compared to a cooperative auditor negotiation strategy, a competitive auditor negotiation strategy is associated with significantly higher additional assessed taxes. However, the competitive strategy is associated with a lower probability that the negotiation partners will reach an agreement. These findings indicate an advantage of combining competitive and cooperative tactics (i.e., using a “mixed strategy”). We find that although this mixed strategy does not lead to significantly fewer additional taxes, it results in a higher agreement probability. Moreover, we show that the probability of using a mixed strategy increases with audit expertise and time pressure, whereas the use of a competitive (cooperative) strategy increases with the availability of higher authority (the quality of the taxpayer's financial accounting system) and a perceived competitive (cooperative or mixed) negotiation strategy of the tax advisor. In sum, our study provides new insights into how firms' tax burden is affected by negotiations between tax auditors and firms' tax advisors. The way these negotiations affect firms' tax burden is relevant for both tax policy and firms.
AB - Using a survey of tax auditors, we investigate which factors determine tax auditors' choice of negotiation strategies during tax audits and analyze the effect of their chosen strategy on audit outcomes. The results show that, compared to a cooperative auditor negotiation strategy, a competitive auditor negotiation strategy is associated with significantly higher additional assessed taxes. However, the competitive strategy is associated with a lower probability that the negotiation partners will reach an agreement. These findings indicate an advantage of combining competitive and cooperative tactics (i.e., using a “mixed strategy”). We find that although this mixed strategy does not lead to significantly fewer additional taxes, it results in a higher agreement probability. Moreover, we show that the probability of using a mixed strategy increases with audit expertise and time pressure, whereas the use of a competitive (cooperative) strategy increases with the availability of higher authority (the quality of the taxpayer's financial accounting system) and a perceived competitive (cooperative or mixed) negotiation strategy of the tax advisor. In sum, our study provides new insights into how firms' tax burden is affected by negotiations between tax auditors and firms' tax advisors. The way these negotiations affect firms' tax burden is relevant for both tax policy and firms.
KW - Negotiation strategies
KW - Tax audit
KW - Tax avoidance
KW - Tax compliance
UR - http://www.scopus.com/inward/record.url?scp=85111969148&partnerID=8YFLogxK
U2 - 10.1016/j.aos.2021.101294
DO - 10.1016/j.aos.2021.101294
M3 - Article
AN - SCOPUS:85111969148
VL - 97
JO - Accounting, Organizations and Society
JF - Accounting, Organizations and Society
SN - 0361-3682
M1 - 101294
ER -