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When are Enhanced Relationship Tax Compliance Programs Mutually Beneficial?

30 Pages Posted: 5 Nov 2011 Last revised: 28 Sep 2013

Lisa De Simone

Stanford Graduate School of Business

Richard C. Sansing

Tuck School of Business at Dartmouth

Jeri K. Seidman

University of Virginia - McIntire School of Commerce

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Date Written: November 4, 2011

Abstract

This study investigates the circumstances under which “enhanced relationship” tax compliance programs are mutually beneficial to taxpayers and tax authorities, as well as how these benefits are shared. We develop a model of taxpayer and revenue authority behavior inside and outside of an enhanced relationship program. Our model suggests that, despite the adversarial nature of the relationship, an enhanced relationship program is mutually beneficial in many settings. The benefits are due to lower audit costs and the effect of taxpayer disclosures on the tax authority’s audit strategy. We also identify settings in which the program would decrease total expected tax compliance and audit costs, but these savings are not achieved because the program would make one party or the other worse off, and thus unwilling to enter the program.

Keywords: tax compliance, multinational taxation, game theory

Suggested Citation

De Simone, Lisa and Sansing, Richard C. and Seidman, Jeri K., When are Enhanced Relationship Tax Compliance Programs Mutually Beneficial? (November 4, 2011). McCombs Research Paper Series No. ACC-07-11; Tuck School of Business Working Paper No. 2012-102. Available at SSRN: https://ssrn.com/abstract=1954823 or http://dx.doi.org/10.2139/ssrn.1954823

Lisa De Simone (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-3874 (Phone)
650-724-3083 (Fax)

HOME PAGE: http://www.gsb.stanford.edu/faculty-research/faculty/lisa-de-simone

Richard C. Sansing

Tuck School of Business at Dartmouth ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-0392 (Phone)
603-646-1308 (Fax)

Jeri K. Seidman

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States

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