3-paper Lit Review - focusing on theorisation and unif of analysis

Paper title: The role of client advocacy in the development of tax professionals’ advice

From Donna D. Bobek, Amy M. Hageman, and Richard C. Hatfield

Research question: how can client advocacy be at least partially context-specific and how does it influence tax professionals’ judgment and decision-making process.

Research method: experiment where all participants are experienced tax professionals.

Data: individual tax professionals’ responses to measures of general advocacy, client-specific advocacy, decision process (consisting of perceived likelihood of legal challenge and weightings of the relevance of the pertinent treasure regulatory governance), and decision outcomes (consisting of recommendation in terms of viewing the ambiguous activity more like a hobby or a business, and allowance of tax treatment of the activity)

Theories used to develop hypotheses

Theory:

Advocacy is normally conceptualised as an attitude which, if related to a particular behaviour, is shaped by an individual’s beliefs about the potential consequences of the behaviour (Roberts 1998, Mason & Levy 2001, Ajzen & Fishbein 1980).

Application / Hypothesis development:

Tax professionals’ client advocacy is an attitude

The particular behaviour is being an advocate of their clients

è Client advocacy is expected to change based on the outcomes associated with behaving as the advocate of a particular client

è The relation between client-specific advocacy and tax professionals’ judgment and decision-making processes is expected to be stronger than when the advocacy is measured at a general level.

My comments

Overall, since the question research looks at individual attitude and judgment and decision-making processes and outcomes, and the data are measures of individual attitudes and judgment and decision-making processes and outcomes, a reconciliation of unit of analysis does not seem to be a concern in this study. (Thus, the theory does not play the bridging role here)

However, my concern centres at the measure of tax professionals’ judgment and decision-making processes. At the first glance, the two measures of the process, which are perceived likelihood of legal challenge and weightings of the relevance of the pertinent treasure regulatory governance, respectively, seem to be appropriate as both the likelihood and the weightings affect the decision-making outcome. However, one may also argue that these two measures are also ‘outcomes’ in the sense that they result from some complex and perhaps iterative thinking process. Such thinking process, nevertheless, cannot be directly measured. It is only possible to understand it if interviews are conduced where tax professionals can express or describe how they make judgment and decisions.

Paper title: The impact of tax professionals upon the compliance behaviour of Australian individual taxpayers

From Ken Devos

Research question: Is there a relationship between the tax professionals’ advice and individual taxpayers’ compliance behaviour

Research method: survey where there are two groups of participants: evaders and non-evaders; compare the answers (frequencies and percentages) to the survey question between the two groups; employ chi-square statistical test to investigate the relationship between tax professionals’ advice and individual taxpayers’ compliance behaviour

Data: Participants response to questions designed on a five-point Likert scale. Four of the total thirty questions relates to tax professionals, including the likelihood of agreeing with a conservative (aggressive) advice from the tax agent and the likelihood of retaining the tax agent who gives conservative (aggressive) advice. There are also other questions regarding the participants’ demographic profile and their primary reason for engaging a tax agent etc.

Hypotheses:

H1: there is a relationship between the reasons taxpayers engage tax professionals and their compliance behaviour

H2: there is a relationship between taxpayers’ preference for aggressive or conservative tax advice from their tax professionals when faced with ambiguous tax law and their compliance behaviour

H3: there is a relationship between taxpayers retaining/terminating their client/advisor relationship based on the tax advice they receive from their tax professionals and their own compliance behaviour

My comments:

No specific theory is used to develop the above hypotheses. Since the author looks at tax professionals’ advice and individual taxpayers’ compliance behaviour, and the data collected indeed measures what they are supposed to measure, unit of analysis seems to be matched.

However, from my perspective, the author simply distinguishes taxpayers who are compliant from those who are not. The extent of non-compliance is not reflected. I suspect that the relationship between non-compliance behaviour and tax professionals’ advice may be moderated by the degree of non-compliance (e.g. the dollar amount involved, the severity of tax law violations etc.). But to be realistic, it seems that the degree of non-compliance can never be (reliably) measured as the tax office may not be allowed to give the information and taxpayers may not correctly state their non-compliance if asked to do so. Thus, it may be a good idea to attempt to quantify non-compliance, it is almost impossible to do it in practice.

 

Paper title: Aggressive tax planning: Differentiating those playing the game from those who don’t

From Kristina Murphy

Research question: what are the factors that lead taxpayers to seek the services of an aggressive tax practitioner?

 

Research method: survey

 

Data: obtained/extracted from data from the Community Hopes, Fears and Actions Survey. Two groups of taxpayers are of interest: those who reported that they preferred a creative accountant and who actually had an aggressive tax agent; and those who did not prefer a creative accountant and did not have an aggressive tax agent. The comparison between the two groups is based on five constructs: demographic profiles, world views, motivational postures, evaluations of the ATO and the tax system, and individual experiences.

Theories and Hypotheses development:

Theory:

Kagan and Scholz’s (1984) political citizen model:

Non-compliance behaviour may result from ‘political citizens’ not persuaded that compliance is an obligation of citizenship and/or from regulators’ unreasonable behaviour.

Social networks and associations shape the formation of perceptions, norms, and attitudes.

Application:

In the context of tax, it is possible that taxpayers’ non-compliance is due to their rebellion against tax authority enforcement actions or laws perceived to be illegitimate.

Socio-psychological factors need to be taken into account when explaining taxpayers’ non-compliance behaviour

My comments:

For the five constructs, the author employed measures developed by prior researchers as proxies. With regards to unit of analysis concerns, it seems that both the theories used and the data collected are of individual’s. However, although data are obtained by surveying individual taxpayers, it is possible that the survey participants may not be the one who actually completed their individual tax self-assessment. For example, their partner may report their tax on their behalf. If that is the case, then the measured demographics, world views, and motivational postures etc. cannot represent those of the true tax reporters.