Abstract:
We propose a game-theoretic investigation to capture the interplay between the behavior of tax consultants, taxpayers, and the tax authority in a setting of tax complexity. Our purpose is to provide answers to two research questions: Which aspects of the strategic interaction between the players induce tax consultants to provide inaccurate consulting services? How can we change the incentive structure in order to improve tax consulting quality? We find that tax consultants can be best motivated to work accurately by exogenously increasing the probability of tax underpayment and by ensuring that the tax authority corrects both tax underpayment and tax overpayment.