Towards an understanding of the tax practitioner-client role relationship : a role analysis

Abstract

Over the years, as tax law has increased in complexity, an increasing number of taxpayers are consulting tax practitioners for help with tax affairs. Yet many tax compliance studies have not incorporated the practitioners' impact on taxpaying behaviour. To bridge the gap in the literature, this thesis investigates the practitioners' and the business taxpayers' roles and relationship using a Tax Practitioner-Client Role Model. This Model is used as a framework for developing a mail survey sent to a sample of business taxpayers and an independent sample of tax practitioners to collect data on their role expectations, experiences and practices, and factors affecting their roles in a tax setting. The findings show that aggressive tax decisions arise from complex interplay between taxpayer and tax practitioner. Practitioners adapted their decision making to suit cautious or aggressive clients. Their assessment of the likelihood of clients being audited or sanctioned was associated with giving advice that is more conservative or more aggressive, but these effects disappeared when practitioners' own risk propensity was taken into account. Practitioners' firm size was also associated with more cautious or more aggressive advice giving. In comparison, taxpayers' own risk propensity and perceived risk of sanctions predicted their decisions to accept or reject their practitioners' aggressive advice. While individual characteristics of taxpayers and practitioners were important in making particular decisions, interactions between them took place against a background of shared understandings of roles as well as some misunderstandings. The strongest evidence of shared understandings was found through the dimensions that defined expectations, experiences and practices. Both practitioners and taxpayers conceptualised the other in terms of three dimensions of 'demands' and 'responses': technical proficiency, cautious advice giving, and aggressive advice giving in this order of importance. Both practitioners and taxpayers concurred on the order, but when it came to deciding whether taxpayers received what they expect from their practitioners and whether practitioners delivered on what they perceived to be their clients' expectations, some interesting ambiguities and conflicts emerged. Taxpayers want all three types of advice, but considered that practitioners fell short of the performance standards expected. Only the technically proficient gap and trust in practitioners affected satisfaction with practitioners' services. This finding implies that a trusting relationship coupled with a competent practitioner is what helps to establish a good practitioner-client relationship. Tax practitioners perceived themselves differently from the way taxpayers perceived them. They saw themselves as being technically competent, more cautious, and less aggressive in giving tax advice than expected. This finding possibly reflects that practitioners are adept at adapting to their clients, and perhaps even weeding out clients who are not likely to work cooperatively. Qualitative data showed that practitioners are well versed in persuading, listening to, and negotiating with clients. Interactions between a practitioner and client not only affected the ultimate decision made by the client but also helped to resolve role conflict. Interaction is indeed part and parcel of the whole decision making process. Future research that delves into the dynamics of the practitioner-client relationship might focus on a set of dyads where two specific questions are asked: how is the trust relationship built and maintained from the perspective of each actor and how is the risk taking and uncertainty of each negotiated while preserving this relationship. This thesis was unable to draw on practitioner-client pairs for data collection and had to rely on independent, albeit much larger random samples. Having established the importance of both trust and risk taking in this thesis, the next step is to return to a more limited set of dyads to tease out complexities in the ways in which these variables interact with each other.