Impact of Tax Advisors and Corrupt Tax Auditors on Taxpayer Compliance

36 Pages Posted: 22 Jan 2019 Last revised: 16 May 2019

See all articles by Viswanath Trivedi

Viswanath Trivedi

Schulich School of Business, York University

Amin Mawani

York University - Department of Accounting

Date Written: January 18, 2019

Abstract

We examine the impact on taxpayer compliance of corrupt auditors seeking bribes in the form of a percentage of taxes payable. The first experiment examines a setting where a taxpayer can choose to report higher income in the presence of a corrupt auditor to reduce the bribe on the under-reported income. The taxpayer can also under-report income since the bribe is always set up to be less than the penalty. Our experimental results show that the presence of a corrupt auditor demanding bribes at levels up to the legally sanctioned penalty for mis-reporting reduces overall taxpayer compliance.

The second experiment examines whether the involvement of a professional tax advisor increases or decreases the percentage of income reported compared to the baseline compliance in the presence of a corrupt tax auditor. If the tax advisor serves more as a gatekeeper and moral authority, the percentage of income reported by the taxpayer client could increase. However, if the tax advisor serves to provide legitimacy to the noncompliant behavior of the taxpayer, then the percentage of income reported by the taxpayer client could decrease. Our experimental results show that in the absence of corrupt auditors, tax advisors are better at improving taxpayer compliance.

Keywords: Corrupt Tax Auditors, Tax Professionals, Experimental Economics

JEL Classification: H26, C91

Suggested Citation

Trivedi, Viswanath and Mawani, Amin, Impact of Tax Advisors and Corrupt Tax Auditors on Taxpayer Compliance (January 18, 2019). 2019 Canadian Academic Accounting Association (CAAA) Annual Conference, Available at SSRN: https://ssrn.com/abstract=3318267 or http://dx.doi.org/10.2139/ssrn.3318267

Viswanath Trivedi (Contact Author)

Schulich School of Business, York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416-736-5066 (Phone)
416-736-5687 (Fax)

Amin Mawani

York University - Department of Accounting ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
125
Abstract Views
1,088
rank
290,728
PlumX Metrics