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Tax Compliance Costs: A Business-Administration Perspective

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  • Sebastian Eichfelder
  • Michael Schorn
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    Abstract

    Using instruments like information technology and paid preparation of tax returns, private taxpayers have a set of strategies to optimize their compliance cost burden. Assuming rational behavior, private businesses can be expected to choose a cost-optimal administration strategy. Nevertheless, we find empirical evidence of small German businesses, in particular, using external support to an insufficient extent. According to our results, doubling the proportion of outsourced compliance activities results in cost reductions of 14.4% to 24.9%. By contrast, we do not find significant evidence for a cost reduction due to an electronic data interchange with the tax and social insurance authorities or the use of a simplified cash accounting method. Therefore, our results give reason for doubt regarding potential cost reductions that could be reached by e-filing or cash-based accounting.

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    Bibliographic Info

    Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

    Volume (Year): 68 (2012)
    Issue (Month): 2 (June)
    Pages: 191-230

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    Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201206)68:2_191:tccabp_2.0.tx_2-r

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    Web page: http://www.mohr.de/fa

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    Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
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    Related research

    Keywords: tax complexity; tax compliance costs; tax advice; outsourcing; e-filing; cash accounting;

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    Cited by:
    1. Sebastian Eichfelder & Kerstin Schneider, 2014. "Tax Incentives and Business Investment: Evidence from German Bonus Depreciation," CESifo Working Paper Series 4805, CESifo Group Munich.
    2. Eichfelder, Sebastian & Kegels, Chantal, 2014. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 200-219.

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