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Tax Compliance Costs: A Business-Administration Perspective

  • Sebastian Eichfelder
  • Michael Schorn
Registered author(s):

    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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    File URL: http://www.ingentaconnect.com/content/mohr/fa/2012/00000068/00000002/art00004
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    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
    DOI: 10.1628/001522108X639981
    Contact details of provider: Web page: https://www.mohr.de/fa

    Order Information: Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
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    1. Blaufus, Kay & Eichfelder, Sebastian & Hundsdoerfer, Jochen, 2011. "The hidden burden of the income tax: Compliance costs of German individuals," Discussion Papers 2011/6, Free University Berlin, School of Business & Economics.
    2. Bankman, Joseph, 2008. "Using Technology to Simplify Individual Tax Filing," National Tax Journal, National Tax Association, vol. 61(4), pages 773-89, December.
    3. Marsha Blumenthal & Joel Slemrod, 1995. "The compliance cost of taxing foreign-source income: Its magnitude, determinants, and policy implications," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(1), pages 37-53, February.
    4. Alm, James, 1996. "What Is an "Optimal'"Tax System?," National Tax Journal, National Tax Association, vol. 49(1), pages 117-33, March.
    5. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-94, September.
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