Tax Compliance Costs: A Business-Administration Perspective

Sebastian Eichfelder and Michael Schorn

FinanzArchiv: Public Finance Analysis, 2012, vol. 68, issue 2, 191-230

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.

Keywords: tax complexity; tax compliance costs; tax advice; outsourcing; e-filing; cash accounting (search for similar items in EconPapers)
JEL-codes: H25 H26 L23 L24 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (15)

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DOI: 10.1628/001522108X639981

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