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Supply-induced demand: insights from tax litigation

Author

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  • L A Esposito

    (UNITO - Università degli studi di Torino = University of Turin)

  • A. Melcarne

    (CNRS, EconomiX, Université Paris Nanterre, 92001 Nanterre)

  • Giovanni Battista Ramello

    (UNITO - Università degli studi di Torino = University of Turin)

  • R. Zanola

    (Università del Piemonte Orientale)

Abstract

Despite extensive literature focusing on the concept of supply-induced demand, there remains a notable dearth of contributions in law and economics. This paper seeks to address this gap by investigating the role of tax advisors in stimulating the demand for litigation in a specific case. To this aim, the paper analyses data from Italy concerning advisors who can push the client to litigate an allegation of the tax authority that could otherwise be solved. The information imbalance between advisors and taxpayers can determine an incentive for the former group to promote litigation to gain from these legal causes. We observe that this phenomenon may be mainly observed in regions in which there is low economic activity, and then not only the opportunity cost for accountants to devote themselves to more lucrative activities is lower, but indeed, litigation can represent an additional source of income, thus representing a profit-maximizing strategy. The results suggest that SID does not depend on the specific field but on the agency relationship, coupling a fiduciary duty with with a mandatory decision to be taken in a short time span.

Suggested Citation

  • L A Esposito & A. Melcarne & Giovanni Battista Ramello & R. Zanola, 2025. "Supply-induced demand: insights from tax litigation," Post-Print hal-05093600, HAL.
    • Handle: RePEc:hal:journl:hal-05093600
    DOI: 10.1007/s10657-025-09836-0
    Note: View the original document on HAL open archive server: https://hal.science/hal-05093600v1
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    More about this item

    Keywords

    Supplier induced demand · Best interest of client · Fiduciary duty · Accounting · Tax advisors · Tax litigation;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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