No. 101: How does technological and human controversy expertise affect tax disputes?

Jahr: 2022
Typ: Working Paper
Open Science:

Abstract

Given the rising number, magnitude and harshness of tax disputes between firms and tax authorities, firms increasingly use controversy expertise as a remedy. This study investigates how two types of tax controversy expertise affect the resolution of tax disputes and compliance incentives. We distinguish between technological expertise provided by the firm’s Tax Risk Management System (TRMS) and human expertise of internal tax controversy managers or external experts. Using a game-theoretic model, we derive equilibrium strategies for a tax manager’s compliance effort, a controversy manager’s dispute resolution effort and a tax authority’s litigation decision. Absent of a controversy manager, we find that improving a firm’s TRMS quality unambiguously decreases the litigation probability. However, in the presence of a controversy manager, we surprisingly find that improving the TRMS quality crowds out compliance efforts and thereby can increase the litigation probability. Overall, we identify conditions under which additional human expertise and higher levels of technological expertise are detrimental to dispute resolution.

Beteiligte Institutionen

Die Hauptstandorte vom TRR 266 sind die Universität Paderborn (Sprecherhochschule), die HU Berlin und die Universität Mannheim. Alle drei Standorte sind seit vielen Jahren Zentren für Rechnungswesen- und Steuerforschung. Hinzu kommen Wissenschaftler der LMU München, der Frankfurt School of Finance and Management, der WHU – Otto Beisheim School of Management, der ESMT Berlin und der Goethe-Universität Frankfurt, die die gleiche Forschungsagenda verfolgen.