The tax avoidance dilemma: taxpayers and government reconciliation in Co-operative Compliance regimes

Academic research on taxes has historically been a primary matter of interest for many disciplines: contributions from finance, economics, law and accounting fields have provided, in the years, a multidisciplinary nature to tax research. One of the main areas of interest – especially for the accounting viewpoint – in the body of tax research literature is focused on tax issues faced by businesses: in particular, many events and trends of the last decades have contributed to give rise to worldwide important concerns regarding corporate tax avoidance behavior. In fact, tax avoidance, despite being a quite young area of research, has received increasing attention in recent times not only from academic tax researchers but also from governmental and supranational institutions and policy makers all over the world, with regard to the magnitude and relevance of tax avoidance practices as well as its determinants and consequences. The aim of the first part of this paper is, actually, to provide a clear view – by integrating the contributions from different fields of study to tax avoidance research – on the main determinants which encourage tax avoidance behavior and aggressive corporate tax planning inside organizations, with a particular focus on non-tax determinants. The second part of the paper, instead, concentrates on the opposite side of tax avoidance: tax compliance. Specifically, it investigates the main factors that influence and foster taxpayers’ compliance level towards their tax obligations, and examines the practical responses that governments and tax authorities have implemented in the past, with the aim of ensuring an adequate level of compliance to the tax system and its provisions. In this context, evidence is presented over the fact that the basic relationship – which refers to the deterrent and punitive approach historically kept by tax authorities in their relationship with (non-compliant) taxpayers – has failed to reach the aforementioned objective. Nevertheless, thanks to the prominent work of the Organization for Economic Co-operation and Development, a renewed concept of relationship between revenue bodies and taxpayers, inspired to principles of openness, transparency, trust and co-operation between the involved parties has taken shape, coined by the OECD as Co-operative Compliance, and subsequently adopted by several countries all over the world in slightly different ways. The ultimate scope of this work is, then, to test – by selecting a company participating in the Italian Co-operative Compliance program, namely Regime di Adempimento Collaborativo, as a case of study – whether the evolution of the basic relationship, and the development of this new framework of interaction between taxpayers and the tax authority, could hinder corporate tax avoidance behavior and their attitude toward aggressive tax planning, encourage voluntary compliance and disclosure of relevant tax risks, and benefit to the whole national tax system.