Taxpayers’ and Tax Auditors’ Acceptance of Cooperative Automated Tax Audits

66 Pages Posted: 25 Jan 2021 Last revised: 28 Nov 2022

See all articles by Paul Brezina

Paul Brezina

Vienna University of Economics and Business

Eva Eberhartinger

Vienna University of Economics and Business

Maximilian Zieser

Vienna University of Economics and Business

Date Written: November 2022

Abstract

This study investigates the acceptance of “cooperative automated tax audits” (CATA) by taxpayers and tax auditors, and specifically the impact of the four features Data Privacy, Algorithm Transparency, Tax Certainty, and Independence from Tax Advisers. CATA allows taxpayers to upload detailed accounting data and receive a timely automatic assessment of the tax due. Following theories on the adoption of e-government services, algorithm aversion, and cooperative tax compliance, we hypothesize that the four features will increase taxpayers’ acceptance of CATA. Using an experimental survey among 331 taxpayers and 530 tax auditors, we analyze the impact of the four features on the acceptance of CATA and their effects on trust in and perceived power of tax authorities. Results indicate that taxpayers’ acceptance depends particularly on Tax Certainty, i.e., the automatic tax assessment cannot be overturned in a follow-up tax audit, but also on data privacy and transparency of the algorithm. Taxpayers perceive CATA as increasing tax authority’s power, and reducing its trustworthiness. In contrast, CATA, particularly when connected to the waiver of possible future tax audits, causes concerns for tax auditors, who react with lower acceptance and expect a loss in power to detect tax evasion. Overall, results suggest a stark mismatch between taxpayers’ and tax auditors’ perceptions about benefits and risks of CATA. Our study is among the first to investigate acceptance of digitalization in tax administration, and to include tax auditors’ views. Results are relevant to policymakers, suggesting that tax authorities should increase their digitalization efforts, incorporate safeguards, and educate about the importance of a trusting relationship between taxpayers and tax authorities.

Keywords: Tax administration, e-government, tax audit, tax compliance, data privacy, algorithm aversion

JEL Classification: H25, H26, H32, H83, M48

Suggested Citation

Brezina, Paul and Eberhartinger, Eva and Zieser, Maximilian, Taxpayers’ and Tax Auditors’ Acceptance of Cooperative Automated Tax Audits (November 2022). WU International Taxation Research Paper Series No. 2021-02, Available at SSRN: https://ssrn.com/abstract=3769337 or http://dx.doi.org/10.2139/ssrn.3769337

Paul Brezina

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Eva Eberhartinger

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna 1020
Austria

HOME PAGE: http://www.wu.ac.at

Maximilian Zieser (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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