Tax Professionals Research Articles

Exposing students to a simulation of the online platform used by the South African revenue service

PurposeStudents completing their tertiary education at a university may be equipped with theoretical knowledge with little to no practical experience. In order to bridge this gap in practical skills, a computer simulation was developed based on the e-filing platform of the South African Revenue Services (SARS). Students were exposed to this self-developed computer simulation to answer the question: to what extent will the e-filing simulation improve students' confidence to practically apply their theoretical knowledge?Design/methodology/approachThe research applied a pre–post questionnaire research method to gauge the students' ability to apply their theoretical knowledge to a practical scenario before and after the simulation.FindingsFrom the results, it is apparent that the students were inspired with confidence in getting to terms with the application of their theoretical knowledge in a real-life scenario. The computer simulation provided the platform for learning to take place in a practical environment without the risk of errors that would translate into real financial consequences.Originality/valueThe contribution of this research can be found in a teaching intervention that may support the training of future tax professionals in practical application skills. The contribution can be extended to the enhancement of education in the field of taxation, particularly with the results' showing that the students experienced high levels of increased confidence in their application of theoretical knowledge to real-life scenarios.

The objectivity of accounting professionals based in India

PurposeThis study aims to examine the objectivity of accounting professionals based in India.Design/methodology/approachTo examine the objectivity of accountants based in India, this study performs an experiment using a well-established instrument from prior literature. The authors asked accounting professionals based in India to act as either the seller or buyer in a hypothetical acquisition scenario. Participants were asked to evaluate the obsolescence of an apparel company’s inventory, assessing both the probability of inventory obsolescence and the likelihood they would propose an inventory write-down.FindingsThe results indicate external auditors and tax professionals were able to remain objective, reflected in the consistency of their assessments across the buyer and seller conditions. Internal auditors were less objective, evaluating inventory obsolescence as more likely when their client was considering buying a subsidiary than when their client was considering selling a subsidiary. Internal auditors were also more likely to recommend an inventory write-down adjustment when hired by the buyer than when hired by the seller.Originality/valueThis study informs regulators and accounting professionals. Offshoring has “prompt(ed) questions regarding the factors that affect the quality of work in India” (Dickey et al., 2022, p. 680). While the authors do not prescribe specific actions, this study provides evidence on the decision-making process of accounting professionals based in India that regulators might use to craft policy. Furthermore, this study responds to calls for additional evidence on the decision-making process of accounting professionals based in India (Spilker et al., 2016; Mohapatra et al., 2015), and for evidence on the objectivity of internal auditors (Burt and Libby, 2021; Stewart and Subramaniam, 2010).

The impact of firm affiliation on accountants’ error reporting decisions

Recent regulatory and professional developments have increased the frequency with which public accountants interact with professionals from other accounting firms. Archival findings in accounting indicate that when the same firm provides both audit and non-audit tax services, audit quality is better than when different firms provide these services, which is attributed to differential communication of audit knowledge, or a “knowledge spillover” effect that occurs between professionals from the same firm. However, empirical research that examines how information is communicated across engagement teams is limited. Using social identity theory, we predict that the communication decisions of accounting professionals could be biased when multiple firms perform accounting services and that this has potential negative implications for audit quality. We conduct an experiment in settings where professional services are split across different accounting engagement teams and find that both tax and audit professionals are more likely to disclose information about possible financial statement errors to auditors from their own firm compared to those from a rival firm. We also find that tax professionals are more willing to communicate errors to a client when another firm is responsible for the error compared to their own firm, but we do not observe this effect for auditors. We believe that these results have important implications for audit quality and provide new insights into the effects of inter-firm collaboration of accountant knowledge sharing.

Policy Forum: The Income Taxation of Crypto Contracts

Current Canada Revenue Agency (CRA) guidance suggests that cryptoassets (such as bitcoin) should generally be taxed as commodities for the purposes of the Income Tax Act. However, recent changes in the regulation of entities that facilitate the purchase and sale of cryptoassets (crypto trading platforms) under securities law have introduced new ways of understanding transactions involving cryptoassets. Many crypto trading platforms hold cryptoassets on behalf of users rather than delivering the cryptoassets directly to them, and the Canadian Securities Administrators has taken the position that this relationship among crypto trading platforms and their users itself constitutes a security. To date, there has been no guidance from the CRA relating to the taxation of these securities, which are known as "crypto contracts." This article considers potential income tax implications arising from the existence of crypto contracts by exploring how income taxation would differ for users of crypto trading platforms if they were taxed on crypto contracts rather than cryptoassets. Specifically, the article considers the treatment of transactions as being on income or capital account, the availability of elections to treat transactions on capital account, the applicability of section 49.1 of the Income Tax Act, and the income taxation of staking rewards earned through crypto trading platforms. Rather than offering conclusions on these topics, this article aims to provide a framework for thinking about crypto contracts from a Canadian income tax perspective and to provoke further thought from Canadian tax professionals.

Tax-Rate Biases in Tax Decisions: Experimental Evidence

ABSTRACTThis study investigates biases in tax decisions. In a series of four laboratory experiments with 303 students and 62 tax professionals, we document a systematic tax-rate bias in decisions under time constraints. Specifically, decision makers overestimate the relevance of less complex tax-rate information compared to more complex tax-base information. This behavior leads to suboptimal tax decisions. We also find that decision making, on average, is unaffected by professional experience: Students and tax professionals are similarly prone to tax-rate bias. However, senior tax professionals are more rationally inattentive. These decision makers are less likely to exhibit a tax-rate bias when exhibiting such bias is relatively costly. Overall, our findings suggest that resource constraints impede the use of complex tax-base information, which results in suboptimal tax decisions. Interviews with senior tax professionals indicate potential for tax-rate biases in real-world tax decisions and thereby provide directions for future research.JEL Classifications: C91; D03; H32; K34; M21; M41.

Knowledge Sharing in Auditor-Provided Tax Services: Experiences of Audit and Tax Personnel

ABSTRACT Research generally finds positive audit and tax outcomes associated with auditor-provided tax services (APTS), attributing knowledge sharing (KS) between tax and audit as the underlying cause but not observing it. This study contributes to the APTS literature by investigating experienced audit and tax professionals’ perspectives about when and how KS occurs. Results imply that KS occurs in two phases and is enhanced or inhibited by multiple factors related to knowledge relevance, motivation, opportunities, and culture. First, audit and tax personnel often share client information and their domain expertise while interacting during the audit, which enables identifying potentially valuable APTS. Second, further KS can occur during/following APTS performance, and APTS results may be shared back to benefit the audit. Our evidence shows that key factors may vary across phases, underscoring the importance of considering the full APTS process. Based on our findings, we suggest a number of future research opportunities. JEL Classifications: M41; M42.

Quality of E-Tax System and Tax Compliance Intention: The Mediating Role of User Satisfaction

The effectiveness of the e-tax system in encouraging tax compliance has been largely unexplored. Thus, the current study aims to examine the interrelationship between technological predictors in explaining tax compliance intention among certified tax professionals. Based on the literature on information system success and tax compliance intention, this paper proposed an expanded conceptual framework that incorporates convenience and perception of reduced compliance costs as predictors and satisfaction as a mediator. The data were collected from 650 tax professionals who used e-Filing and 492 who used e-Form through an online survey and analyzed using hierarchical multiple regression. The empirical results suggest that participants’ perceived service quality of e-Filing services and perceptions of reduced compliance costs positively influence users’ willingness to comply with tax regulations. The latter predictor is also, and only, significant among e-Form users. The empirical results also provide statistical evidence for the mediating role of satisfaction in the relationship between all predictors and tax compliance intention. This study encourages tax policymakers and e-tax filing providers to improve their services to increase user satisfaction and tax compliance.

Reverse engineering tax education: How tax practice can inform the classroom experience

If the purpose of collegiate tax education is to prepare tax professionals, it should begin with the end in mind. An accurate and up-to-date appreciation of tax practice should inform the formal education that precedes it. Grounded in the theory of situated learning, this paper offers the insights of interviews with junior and senior tax professionals about their work and careers. The results suggest that we need to improve our appreciation for how people learn in their professional careers. Even though there remains value to a generalist appreciation of tax, formal education also needs to help students develop their specialization. Tax education also needs to help students adjust to the technology of tax compliance that they are likely to encounter in practice. Other suggestions are made for the reconsideration of traditional elements of introductory tax courses, based on the reflections of practitioners.

Transfer pricing applicability: Perceptions of the tax professionals

Recently, transfer pricing (TP) regulation was introduced in Jordan for the first time in the country’s history (Income and Sales Tax Department [ISTD], 2021). This research evaluates the overall awareness of tax professionals on TP and its applicability in the early stage of its implementation. This is mainstream accounting research that adopts the quantitative research approach to collect data. In this context, a research questionnaire consisting of 29 items was designed and distributed to TP specialists to investigate four key aspects of TP applicability and impact. The results of the study revealed that the majority of respondents have a good level of understanding of the TP regulation and the concept itself. In terms of the applicability of TP, the results revealed that less experience in how to implement the TP regulation has been gained so far due to insufficient training. It was also indicated that digitalized systems have a significant role in filing TP transactions efficiently. According to the tax professionals’ perceptions, TP has been shown to have a possible influence on lowering the overall tax burden and tackling tax evasion, which leads to increased compliance with the tax law. Statistically, it has been revealed that the perceptions of the tax professionals in Jordan towards the awareness, applicability, and implementation of the TP regulation were not significantly differentiated according to their demographical and professional characteristics. Finally, this research concludes with practical implications and some recommendations for future studies

Does Religiosity Moderate Personal Tax Compliance? A Study Involving In-House Tax Professionals of Malaysian Businesses

This study limns the moderating impact of religiosity made on the in-house tax professionals who deal with tax affairs in the corporate sectors in Malaysia. Therefore, we intend to produce a seminal article, wherein religiosity is tested for its moderating effect between the determinants such as peers’ tax compliance, tax audit, service quality of tax authority, satisfaction with government spending, and the level of tax compliance among the tax affairs officers. Purposive and snowball sampling techniques have been chosen to collect data from the tax professionals of the Malaysian businesses. A total of 392 respondents have managed to participate in this survey questionnaire to disclose their opinion. “SmartPLS’ is used to analyse the data. The finding reveals that religiosity does not moderate the relationship between the determinants and the level of tax compliance among the Malaysian tax professionals. The interpretation of the relationship between the “Factors of Personal tax compliance’ (Independent variables) among the tax affairs officers of the Malaysian businesses and the “Personal tax compliance behaviour’ (Dependent variable) can be explained by 83.9 percent by the variance studied. To produce an extensive and expeditious report of exploration on the said nexus of personal tax compliance and the taxpayers’ decision on the corporate tax compliance, the selection of one type of data collection approach is not sufficient. Therefore, the future researchers are advised to make research with the collection of supplementary data, such as interviews, as their primary data collection so that the robustness of their findings could be strengthened.

Impeded Knowledge Sharing between Auditors and Tax Professionals and Audit Outcomes

Impeded Knowledge Sharing between Auditors and Tax Professionals and Audit Outcomes

Бізнес-термінологія соціальних медіа в контексті об’єктів бухгалтерського обліку

The aim of the study is to adapt modern business terminology used in social networks (media) to the legislative framework of accounting and taxation. By drawing a parallel between terms in social media and terms (objects) used in accounting and taxation, it became possible to quickly adapt the legislative framework of accounting to the modern language of business. The works of domestic and foreign scholars related to accountance of business in social networks were studied, allowing to understand the identity of this problem both in Ukraine and over the world. As a result of the study, the problems of synchronization of terminology in social networks with accounting objects are allocated. Among the main ones are: differences in interpretation of terms, lack of standardization, limited context of information, rapid change of terminology, and cultural differences. It is determined that in order to successfully solve these problems, it is necessary to maintain clear communication, improve the accountants’ knowledge of digital technologies and relevant terminology in various spheres and spaces (either offline or online). An analysis of business terminology in social media in the context of accounting objects was carried out, which necessitates changes in the legislative framework of Ukraine, including accounting and taxation; the regulatory documents that require mandatory changes have been considered. The proposed changes in regulatory documents, first of all, will avoid many errors in accounting and reduce the time for studying specific accounting objects. This research is important for accountants and accounting and tax professionals because it will help them use social media effectively in the context of accountance and will help improve communication and understanding between different business sectors using different terms and approaches.

Demystifying the value-added tax effects of foreign branches in South Africa: The Wenco case

The application of South African value-added tax (VAT) principles to transactions involving foreign branches is challenging. A recent judgment made in Wenco International Mining Systems Ltd & another v CSARS (59922/2019) [2021] ZAGPPHC 70 brought the uncertain applications of the VAT Act to the forefront. An awareness of the uncertainties could guide policymakers to improve the legislation and assist tax professionals who advise their clients. This research adopts a qualitative approach and traditional legal doctrinal methodology. It proposes amendments to the legislation. I question the application of s 8(9) of the VAT Act because proviso (ii) of the definition of ‘enterprise’ separates the activities of foreign branch or foreign main business from those of the vendor. It is unclear if a foreign branch or foreign main business is treated as a separate ‘person’ in the VAT Act, with all the accompanying powers of another ‘person’. The proviso is also unclear about whether it applies only if the foreign branch or foreign main business makes supplies ‘for consideration’. It is unclear whether s 11(1)(i) and 11(2)(o) should apply, as opposed to s 11(1)(a) and 11(2)(l).

Pendulum or Progress? Tax Consultants in the Crisis of Legitimacy

After a series of scandals, the focus is now shifting to tax professionals who have received little attention so far. The paper examines how tax professionals justify their professional activities in the legitimacy crisis of tax planning. Professions have a systemic role and combine commercial interest with social benefit. In the crisis, professionals need to re-legitimize themselves by addressing core societal values in order to secure the benefits associated with professional status. Building on problem-centered qualitative interviews with 45 tax professionals from Germany, Liechtenstein, and Austria with different business models, I show that these tax professionals justify their activities in the crisis via three ideal-typical norms: selective liberal values and counterattacks, elitist shaping, and the benefits for the business location. Most professionals hope for a pendulum movement as a rollback of regulation.

Knowledge Collaboration among Tax Professionals through the Lens of a Community of Practice

This paper presents knowledge collaboration among tax professionals in a tax-knowledge context within Malaysian accounting associations through the conceptual lens of a community of practice. Semi-structured in-depth interviews were conducted with a total of 29 tax professionals. Additionally, data were also gathered from field notes and archival data. The findings revealed that the Malaysian accounting-professional associations reflected a community of practice. Knowledge collaboration occurs among members in this community in order to attain the highest standard of technical and professional competency in tax knowledge and practice. The findings from this study complement and expand previous research on CoP, knowledge management, and collaboration. The findings suggest exploring a better strategy to implement a central repository of knowledge acquired or generated by the members within the community to support the learning lifecycle.

The Blockchain Technology and Tax Compliance: Possibilities and Potential Uses

This work represents a study aimed at exploring the relationship between Tax Compliance and the distributed ledger technology known as "Blockchain," without fully exhausting the subject matter. The main objective is to clarify and demonstrate the potential uses of Blockchain technology in facilitating corporate tax compliance. The anticipated potentials of this technology are just as significant as the possibilities it offers for tax authorities in terms of monitoring tax collection, which will also be addressed.
 The study adopts an inductive method and relies on research conducted through bibliographic and jurisprudential sources, both in physical and digital formats. The research is justified by the revolutionary potential that Blockchain technology holds for tax compliance activities. The hypothesis guiding this research is that Blockchain technology can be effectively and disruptively applied in the field of Tax Compliance.
 Through a thorough analysis of basic concepts related to Blockchain technology, this study reaches the conclusion that the hypothesis is valid. It identifies various fiscal issues that can benefit from the use of this technology and presents concrete cases where it is already being implemented in Brazil. Furthermore, the study explores potential applications of Blockchain technology in Tax Compliance based on research and publications by leading accounting and tax auditing firms worldwide.
 The topic addressed in this study is highly relevant and timely, as the practical possibilities of Blockchain technology are just beginning to emerge. Recent developments, such as the launch of Blockchain systems by Brazil's tax authorities, further emphasize the importance and timeliness of this research.
 In conclusion, this study aims to contribute to the understanding of the potential uses of Blockchain technology in the context of Tax Compliance. It highlights its disruptive potential and offers insights into how this technology can transform the routines of tax professionals in the coming years.

Policy Forum: Technology and the Evolving Workforce

Globally, we are seeing record numbers of people leaving their jobs and in many cases making significant career changes. In tax, this is resulting in a shrinking talent pool, making it even harder to find people with the necessary skills to fill these gaps. At the same time, the requirements and demands imposed on tax professionals are increasing and expanding. In this article, the authors look at how tax technologists and technological solutions such as machine learning can help.

Foreign Law in U.S. International Taxation: The Search for Standards

This article was written while the author was with the law firm of Steptoe & Johnson LLP. The opinions expressed in the article do not necessarily reflect the views of the Treasury.Copyright © 1996 by Philip R. West.Among U.S. tax professionals, references to international taxation commonly encompass two things: the U.S. tax rules that apply to the U.S. income of non-U.S. persons, and the U.S. tax rules that apply to the non-U.S. income of U.S. persons. In both cases, the focus is on U.S. rules. Frequently, however, foreign law affects the application of these U.S. rules. This article examines the role of foreign law in U.S. international taxation.In a variety of contexts, U.S. tax law either explicitly or implicitly requires an interpretation of foreign law or allows for an argument that foreign law is relevant to U.S. tax consequences. Neither the courts nor the Treasury has, however, articulated a standard for determining when foreign law should be taken into account and, where foreign law is taken into account, what its proper role should be in the interpretation of U.S. tax rules. As a result, taxpayers and the government continue to dispute the role of foreign law in interpreting U.S. tax rules. Even different courts may take different views of the relevance of foreign law to what appears to be the same U.S. tax issue.

Commentary on Return Preparer Obligations

This paper was originally written for the Second Invitational Conference on Professionalism in Tax Practice, which was scheduled to be held in Washington in January 1996 under the sponsorship of the American Bar Association Section of Taxation, the American College of Tax Counsel, the American Institute of Certified Public Accountants, the National Association of Enrolled Agents, the National Association of Tax Practitioners, the National Society of Public Accountants, and the Tax Executives Institute. The Conference was postponed because of the Blizzard of 1996.Copyright © 1996 by Michael B. Lang.Our income tax system requires that taxpayers report their income annually and assess the correct amount of tax on this income. This selfassessment system, however, depends on taxpayers ferreting out the provisions of the tax law that apply to them and properly applying those provisions to their factual situations. The immensity and complexity of the tax law and the difficulty of applying even apparently clear legal provisions to complex sets of facts (the most difficult lesson in law school for the typical law student) make this process impossible for many taxpayers. As a result, they turn to tax professionals for assistance in preparing tax returns.These professionals generally fall into one or more of four groups: (1) lawyers licensed to practice law in at least one state or the District of Columbia (licensed lawyers); (2) certified public accountants (CPAs); (3) those admitted to practice before the IRS under the provisions of Circular 230; and (4) "income tax return preparers," as defined in section 7701 (a)(36 (return preparers). Professionals in each category are subject to their own set of practice standards. Many professionals in the tax field are members of more than one group and thus subject to multiple sets of standards. For example, licensed lawyers or CPAs may be subject to their respective state regulatory authorities, Circular 230 (because they are admitted to practice before the IRS), and the statutory provisions affecting return preparers.Once the taxpayer seeks the help of a professional, several difficulties inevitably mar the return preparation process. First, although the professional should be more skilled at finding the tax law relevant to the taxpayer's situation, the professional's knowledge of the facts underlying the taxpayer's tax situation depends entirely on the information known to and conveyed by the taxpayer. The way in which the professional inquires about the facts may influence how the facts are reported by the taxpayer. Hence, the taxpayer's response is a function of the professional's inquiry. Furthermore, the taxpayer may deliberately slant the facts in the hope of reducing her tax, or simply fail to report all of the relevant facts because of misunderstanding, misperception, forgetfulness, or the like. These considerations raise the prospect that a return prepared by even the most assiduous professional may be less accurate than what a well-informed, well-intentioned taxpayer might have prepared independently.

Defining Income

More than half a century ago in Commissioner v. Glenshaw Glass, the Supreme Court defined "income," as used in section 61 of the Internal Revenue Code, as "undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion." The Code narrows the scope of income by providing for specific exclusions but, outside of those exclusions, the Code's own, self-referential definition-"gross income means income from whatever source derived" - seems to confirm the broad scope of the definition.The breadth of the Glenshaw Glass definition appears to be nearly co-extensive with the Haig-Simons definition of income, which is widely accepted as providing the theoretical foundation for the income tax. Accordingly, many tax professionals interpret the language in section 61 and Glenshaw Glass solely in light of the economic principles reflected in the Haig-Simons definition. The analytical structure for determining what is income appears clear and is generally treated as immutable. The analysis begins with the broad mandate of section 61 and Glenshaw Glass. As long as there is a realized accession in the economic sense within the taxpayer's dominion, Glenshaw Glass would seem to provide that there is income unless, pursuant to the very first words of section 61, there is an exclusion in the statute. From the time they are introduced to the tax law, students are taught this analytical structure, and by the time they become practitioners and then judges or scholars, it is second nature.