ABSTRACT
Following a tax audit, disputes often occur between taxpayers and tax authorities regarding specific tax issues. Legal negotiation is considered the appropriate solution to resolve this problem. The current tax environment enables parties to negotiate through an online alternative dispute resolution platform. The role of negotiation in tax audits is to align the different motivations of taxpayers or tax practitioners and the tax authorities. During the tax audit, a tax consultant often acts as a taxpayer’s representation. This study examines the influence of the negotiation partner’s objectives and their communication style in resolving disputes over tax issues with the tax authorities on the negotiation outcome. To accomplish this purpose, study participants completed a tax negotiation task using a 2 × 2 between-subject design. The experiment used a web-based instrument involving 59 practicing tax professionals from all over the world. This online negotiation may represent an alternative dispute resolution platform. The results show that tax consultants’ agreement proposals are more conservative when negotiating with tax authorities with high “concern-for-other” (CFO) than when negotiating with tax authorities who possess low CFO. Further, agreement proposals are more conservative when tax authorities use a cooperative communication style in negotiating than when they use a contentious communication style. We also find that the effect of communication style on the agreement proposal is contingent on the partners’ objective. Lastly, the agreement proposal is more conservative when the consultant is negotiating with a partner with a cooperative communication style as opposed to a contentious style in a low CFO situation.
JEL Classification: H26, H32
