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2012 ATA Doctoral Consortium
Tax (professional) decision making
Anne M. Magro
George Mason University
OVERVIEW
Who are the major players in tax DM settings? What data are available or can be acquired? What does the experimental research methodology
bring to the table? Which DMs/decisions could we study using
experiments? Which DMs/decisions have we studied using
experiments and what have we learned? What are the opportunities and challenges in
pursuing experimental tax?
Major Players
Major Players
Major Players
Major Players
Major Players
Available data
Tax data in financial statements tax provision footnotes
Court decisions IRS panel data
Acquirable data
Surveys Field studies Partnerships with taxing authorities Experiments
Acquirable data
Surveys Field studies Partnerships with taxing authorities Experiments
Top three reasons to use experiments…
Advantages of experiments
CONTROL CONTROL CONTROL
That control comes from …
Advantages of experiments
CONTROL
Rigor is up front. Design of environment Manipulated variables Random assignment to treatments
What that rigor does for us …
Advantages of experiments
CONTROL Rigor is up front
It allows us to test theory talk about causation Test environments/policies that do not exist
But at the expense of …
Advantages/disadvantages of experiments
CONTROL Rigor is up front Test theory Talk about causation Test new environments/policies
Decreased external validity
DMs we could study with experiments
DMs we have studied experimentally
Behavioral tax publications 1992-2012
Journal Tax pros Taxpayers others
TAR 6 3 0
JAR 1 0 0
JAE 0 0 0
CAR 1 5 0
AOS 1 0 0
RAST 0 0 0
JATA 14.5 24.5 3
BRIA 6 4 1
Tax Professional DM: TasksTransaction-based DM:
Fact identification
Issue identification
Information identification
Search
Selection
Stopping rules
Information evaluation
Information weighting
Analogical reasoning
Info characteristics combination
Transaction structure recommendation
Transaction structure identification
Risk assessment
Transaction selection
Reporting option recommendation
Option identification
Risk assessment
Option selection
Practice-based DM:
Documentation/justification
Client communications
Practice management
Client selection
Client retention
Review process
Negotiations
Clients
IRS
Professional. staff management/development
Training
Staffing
Time budgeting
Time recording
Outsourcing
Tax Risk Management
Tax Professionals DM: Individual/Task/Environment FactorsDynamic information
Teams
Groups
Hierarchical teams
Expertise
Experience
Incentives
Knowledge/memory
Planning/compliance
Complexity
Ambiguity
Justifiability demands
Creativity
Client preferences
Accountability
Information order/presentation
Decision aids
Practice risk
Regulatory environment
Professional standards
Government regulation
Support thresholds
Penalties
Reporting requirements
Client characteristics
Litigation risk
Time pressure
Outsourcing
Certification
Ethics
Financial reporting
Risk preferences
Client advocacy
Other parties
TASKS
FIN 48 analyses
Auditors
Tax pros
Financial accountants
Negotiations and settlements – IRS
Applying the law – Judges and juries
Investment decisions – investors
Purchasing decisions – customers
Voting patterns – voters
INDIVIDUAL/TASK/
ENVIRONMENT
Knowledge
Experience
Expertise
Incentives
Complexity
Ambiguity
Risk
Etc….
Opportunities in experimental tax Tax is a unique setting So much has not been done!!!
Within tax professional domainWithin taxpayer domainWithin domain of other DMs
Relatively small number of researchers Terrific community of scholars
ATA Mid-year Meeting and JATA Conference ABO Research ConferenceBehavioral Tax Symposium
Challenges in experimental tax
Tax is a unique setting So much has not been done!!! Relatively small number of researchers Access to professional participants is limited Doing good work is hard Overcoming bias against experimental work
Literature Reviews
Taxpayer Decision Making• Jackson and Milliron. 1986. Journal of Accounting Literature• Cuccia. 1994. Journal of Accounting Literature
Tax Professional Decision Making• Shields, Solomon and Jackson.1995. Book Chapter.
Behavioral Tax Research: Prospects and Judgment Calls• Roberts. 1998. Journal of the American Accounting
Association
