Moral reasoning in tax practice: the development of an assessment instrument

Abstract

Ethics is an important issue in tax practice, with ethical dilemmas involving tax issues being identified by members of the American Institute of Certified Public Accountants as posing the most difficult ethical or moral problem for them (Finn et al. 1988: 607-9). Cognitive developmental psychologists believe that before an individual reaches a decision about how and whether to behave ethically in a specific situation, ethical or moral reasoning takes place at a cognitive level. The psychology ofmoral reasoning aims to understand how people think about moral dilemmas and the processes they use in approaching them. Kohlberg (1973) developed a six-stage model of moral reasoning based on concepts of social cooperation and justice. James Rest (1979a) subsequently developed a test, named the Defining Issues Test (DIT), which is based directly on Kohlberg’s model and measures moral reasoning. The DIT is “a broad, general measure of moral reasoning” (Fisher 1997: 143), acceptable in dealing with personal issues in a social context (Fraedrich et al. 1994). However, concern has been expressed that it does not, and cannot, fairly represent the reasoning used in facing ethical dilemmas in a business context (Trevino 1986, 1992; Weber 1990; Elm and Weber 1994; Fraedrich et al. 1994; Welton et al. 1994; Dellaportas et al. 2006). Investigating moral reasoning in a particular context, therefore, requires aninstrument that uses dilemmas from that context. This chapter describes the process of developing such an instrument, using a tax context-specific adaptation of Rest’s well-known and validated DIT, to examine the ethical reasoning of tax practitioners.1 The development of this instrument was part of a larger project which combined the newly developed context-specific instrument with the short version of the original DIT (to investigate moral reasoning in the social and tax contexts),and disseminated it to both tax practitioners and non-tax specialists (the control group) in order to examine the moral reasoning of tax practitioners relative to non-specialists in both contexts. The use of a control group addressed one of the gaps in prior DIT research carried out on professionals. A control group was considered critical in this study to allow the results to be interpreted in relation to tax practitioners. For example, if tax practitioners should reason differently in social and tax contexts this cannot be attributed to their professional status unless we know how those outside the profession behave; the result might just reflect the reasoning norms of society at large. The development of the tax-context instrument itself is the primary focus of thischapter.