Responsive Regulation, Risk, and Rules: Applying the Theory to Tax Practice

Abstract

John Braithwaite’s seminal work on responsive regulation has been taken up and developed by tax authorities around the world. It has had a major impact on methods of tax administration. This approach has some limitations and difficulties, however, including constitutional objections. This article analyses the theoretical literature on responsive regulation and risk rating with special reference to enhanced co-operation between large business and HMRC, to demonstrate the advantages and limits of these compliance tools. The analysis shows that these techniques have great value, but that in a tax context a clear legal framework is necessary to protect both taxpayers and revenue authorities when using methods that involve co-operation and persuasion.

Keywords: tax, responsive regulation, risk rating