When are Enhanced Relationship Tax Compliance Programs Mutually Beneficial?

37 Pages Posted: 2 Jul 2012

See all articles by Richard C. Sansing

Richard C. Sansing

Tuck School of Business at Dartmouth

Jeri K. Seidman

University of Virginia - McIntire School of Commerce

Lisa De Simone

Stanford Graduate School of Business

Date Written: June 2, 2012

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 tax authority and taxpayer 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 is socially beneficial, but these benefits are not achieved because one party is unwilling to enter the program. Finally, we show that an increase in the ability of the tax authority to identify uncertain tax positions makes an enhanced relationship tax compliance program more attractive to both the taxpayer and the tax authority.

Suggested Citation

Sansing, Richard C. and Seidman, Jeri K. and De Simone, Lisa, When are Enhanced Relationship Tax Compliance Programs Mutually Beneficial? (June 2, 2012). 2012 AAA Annual Meeting - Tax Concurrent Sessions. Available at SSRN: https://ssrn.com/abstract=2097907 or http://dx.doi.org/10.2139/ssrn.2097907

Richard C. Sansing (Contact Author)

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

Lisa De Simone

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

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