Tax Practitioners and Tax Avoidance: Gaming through Authorities, Cultures and Markets

Abstract

Tax practitioners, otherwise referred to as tax agents, tax preparers, tax accountants and tax lawyers, play multiple roles in our tax and financial planning systems. They are gatekeepers to the tax system for those who know they need to engage but want someone else to take care of it for them. Empirical work collected from taxpayers and practitioners supports the idea that practitioners, like other professionals, are responsive to influences from many sources – clients, tax authorities, professional associations, governments, international bodies, and the organisations and cultures in which they work. Tax practitioners operate with imperatives that are not necessarily compatible: to attract clients, meet taxpayer expectations, meet performance standards set by firm partners, build reputation, abide by professional obligations and any associated regulatory standards, and operate in accordance with the rules set down by the tax authority. Tax practitioners have always been considered important as intermediaries of transactions between taxpayers and tax officials. In recent decades their role has become more complicated with recognition that they, not taxpayers hold the special knowledge required to facilitate tax avoidance, or what Lipatov (2012) calls sophisticated as opposed to simple tax evasion.

To understand how to curb the growing acceptance of tax avoidance and the threat it poses to tax systems, the tax practitioner – taxpayer relationship must be understood within a broader social and cultural context. This paper proposes that the tax practitioner – taxpayer relationship is a micro social process to deliver tax compliance. Three models of the tax practitioner and taxpayer experience are reviewed and research on the role of the tax practitioner is discussed within these frameworks. Finally, new data are presented on how tax practitioners operate within the tax preparation market, with full knowledge of oversight by the tax authority. The findings are based on a survey of over 1,000 practitioners preparing and lodging returns for clients with the Australian Taxation Office (Wurth 2013). Drawing on lessons learnt from these three models, an integrated model is provided to broaden the landscape against which we view and study developments in the tax avoidance industry.

Keywords: Tax Avoidance, Tax Practitioners, Tax Compliance, Regulation, Tax System

JEL Classification: H20, H26