Supply-induced demand: insights from tax litigation

L. A. Esposito, A. Melcarne, Giovanni Battista Ramello () and R. Zanola
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L. A. Esposito: Università di Torino
A. Melcarne: Université de Paris Nanterre
Giovanni Battista Ramello: Università di Torino
R. Zanola: Università del Piemonte Orientale

European Journal of Law and Economics, 2025, vol. 59, issue 2, No 3, 257-276

Abstract: 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.

Keywords: Supplier induced demand; Best interest of client; Fiduciary duty; Accounting; Tax advisors; Tax litigation (search for similar items in EconPapers)
JEL-codes: H20 H41 J44 K41 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10657-025-09836-0

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