Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314430 
Authors: 
Year of Publication: 
2025
Series/Report no.: 
arqus Discussion Paper No. 290
Publisher: 
Arbeitskreis Quantitative Steuerlehre (arqus), Berlin
Abstract: 
This study investigates how strategic interactions between corporate tax planning and tax enforcement are affected by two policy instruments: strengthening tax enforcement by increasing the number of specialized enforcement staff and improving tax audit technologies. I employ an economic model with a board of director's investment in a Tax Control Framework (TCF) and a tax manager's tax planning effort jointly shaping corporate tax planning and a tax auditor's technology-based audit decision. I show that the board only invests in the TCF when the enforcement environment is sufficiently strict, because it trades-off the costs and benefits of tax planning. Since strengthening tax enforcement decreases tax planning effort, the result can be less investment in a TCF in a strict enforcement environment, implying that TCF investment and enforcement can be strategic substitutes. Strikingly, I identify conditions under which improvements in tax audit technology increase corporate tax planning and impair tax audit efficiency, due to a crowding out of audit incentives. This result contradicts the view that improving audit technologies is universally effective, particularly in tax authorities with adequate staffing.
Subjects: 
tax control framework
tax planning
tax risk management
tax audit technology
tax enforcement
JEL: 
H26
H32
M42
M48
C70
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.