The Return on Investments in Tax Planning for Employees: Evidence from Germany

45 Pages Posted: 27 Oct 2012

See all articles by Kay Blaufus

Kay Blaufus

Leibniz Universität Hannover

Frank Hechtner

Friedrich-Alexander-Universität Erlangen-Nürnberg

Axel Möhlmann

Deutsche Bundesbank

Date Written: October 26, 2012


Tax preparation firms advertise their services as a way to save taxes. Along this line, we use a large cross-sectional sample of German income tax accounting data, consisting of employees and other taxpayers with non-business income, to explore the relationship between expenses for tax preparation and tax liabilities. We find a negative link with expenses exceeding estimated tax savings. Specifically, one additional Euro yields estimated tax savings of only 75 Cents which implies that individual tax planning is no profitable investment from a tax saving perspective. In consideration of time savings, tax planning is worthwhile only for high income groups. This result suggests for most taxpayers an overinvestment. Potential explanations include an overvaluation of time and tax savings or a benefit of tax planning beyond these savings.

Keywords: tax planning, response to taxation, tax advisors, tax return preparation

JEL Classification: H24, H31

Suggested Citation

Blaufus, Kay and Hechtner, Frank and Möhlmann, Axel, The Return on Investments in Tax Planning for Employees: Evidence from Germany (October 26, 2012). Available at SSRN: or

Kay Blaufus

Leibniz Universität Hannover ( email )

Institut für Betriebswirtschaftliche Steuerlehre
Koenigsworther Platz 1
Hannover, 30167

Frank Hechtner

Friedrich-Alexander-Universität Erlangen-Nürnberg ( email )

Lange Gasse 20
Nürnberg, 90403

Axel Möhlmann (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt, DE 60431


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