The effect of tax preparation expenses for employees: Evidence from germany L’incidence des frais de préparation des déclarations fiscales sur les salariés : Données allemandes

Blaufus K, Hechtner F, Moehlmann A (2017)

Publication Language: English

Publication Type: Journal article

Publication year: 2017

Journal

Contemporary Accounting Research Canadian Academic Accounting Association

Book Volume: 34

Pages Range: 525-554

Journal Issue: 1

DOI: 10.1111/1911-3846.12240

Abstract

Using a panel of German income tax accounting data from taxpayers with no business income (employees), we find a negative relationship between tax preparation expenses and tax liabilities. However, preparation expenses are shown to exceed estimated tax savings. Specifically, one additional Euro spent on preparation yields an estimated tax savings of 72 cents in an OLS regression and 24 cents in a fixed effects regression. In addition, we observe substantial heterogeneity in tax savings among income groups, but even if we account for long-term tax savings, tax liability reductions exceed tax preparation expenses only for the highest income quintile. In all other income quintiles, average preparation expenses exceed the estimated tax and time savings. Based on these results, we also examine whether other specific benefits affect an individual’s decision to purchase tax preparation services, and the results indicate the importance of the benefits of coping with complexity and reduced uncertainty. Overall, our findings illustrate that the current tax compliance process violates at least two of Adam Smith’s principles of taxation, taxes are neither certain nor fair.

Authors with CRIS profile

Frank Hechtner

Involved external institutions

Gottfried Wilhelm Leibniz Universität Hannover DE Germany (DE) Freie Universität Berlin DE Germany (DE)

How to cite

APA:

Blaufus, K., Hechtner, F., & Moehlmann, A. (2017). The effect of tax preparation expenses for employees: Evidence from germany L’incidence des frais de préparation des déclarations fiscales sur les salariés : Données allemandes. Contemporary Accounting Research, 34(1), 525-554. https://doi.org/10.1111/1911-3846.12240

MLA:

Blaufus, Kay, Frank Hechtner, and Axel Moehlmann. "The effect of tax preparation expenses for employees: Evidence from germany L’incidence des frais de préparation des déclarations fiscales sur les salariés : Données allemandes." Contemporary Accounting Research 34.1 (2017): 525-554.

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