1. 2012 ATA Doctoral Consortium Tax (professional) decision making Anne M. Magro George Mason University

2. 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?

3. Major Players Taxing authorities TaxpayersCourts Other Stakeholders

4. Major Players Taxing authorities Federal authorities (IRS, foreign) State authorities Local authorities TaxpayersCourts Other Stakeholders

5. Major Players Taxing authorities Federal authorities (IRS, foreign) State authorities Local authorities Taxpayers Corporations Non-profits Individuals Courts Other Stakeholders

6. Major Players Taxing authorities Federal authorities (IRS, foreign) State authorities Local authorities Taxpayers Corporations Non-profits Individuals Courts Judges Juries Other Stakeholders

7. Major Players Taxing authorities Federal authorities (IRS, foreign) State authorities Local authorities Taxpayers Corporations Non-profits Individuals Courts Judges Juries Other Stakeholders Investors Creditors Customers Voters

8. Available data Tax data in financial statements tax provision footnotes Court decisions IRS panel data

9. Acquirable data Surveys Field studies Partnerships with taxing authorities Experiments

10. Acquirable data Surveys Field studies Partnerships with taxing authorities Experiments Top three reasons to use experiments…

11. Advantages of experiments CONTROL That control comes from …

12. Advantages of experiments CONTROL Rigor is up front. Design of environment Manipulated variables Random assignment to treatments What that rigor does for us …

13. 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 …

14. Advantages/disadvantages of experiments CONTROL Rigor is up front Test theory Talk about causation Test new environments/policies Decreased external validity

15. DMs we could study with experiments Tax executives Other executives Tax authority employees Judges Jurors Investors Creditors Customers Tax professionals Individual taxpayers

16. DMs we have studied experimentally Tax authorities (1 study) Managers (1 study) Tax professionals Individual taxpayers

17. Behavioral tax publications 1992-2012 JournalTax prosTaxpayersothers TAR630 JAR100 JAE000 CAR150 AOS100 RAST000 JATA14.524.53 BRIA641

19. Tax Professional DM: Tasks Transaction-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

20. Tax Professionals DM: Individual/Task/Environment Factors Dynamic 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

21. 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….

22. Opportunities in experimental tax Tax is a unique setting So much has not been done!!! Within tax professional domain Within taxpayer domain Within domain of other DMs Relatively small number of researchers Terrific community of scholars ATA Mid-year Meeting and JATA Conference ABO Research Conference Behavioral Tax Symposium

23. 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

24. 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