NEGOTIATING STRATEGIES FOR TAX DISPUTES - PREFERENCES OF TAXPAYERS AND AUDITORS

Disputes between officials and citizens during tax enforcement differ from most civil disputes between citizens in several ways: They are initiated when the official claims the citizen has not followed the law; they are fundamentally about the correct interpretation of the law; and the official has the formal power to end the dispute within the enforcement arena by making a decision that is legally binding on the citizen. Using data from pre-audit interviews with taxpayers and state tax auditors, we explore how these characteristics of tax disputes, the roles of the parties, citizens' perceptions of the attitudes and orientations of the officials, and other contextual factors drawn from regulatory and procedural justice research affect the strategies officials and citizens prefer for resolving disputes. We close with some evidence on the predictive relevance of the strategic preferences of the parties in combination with their roles: For new resolutions to emerge, the party with the power must be open to them, and the subordinate party must have the assertiveness to present them. We also explorate how the analysis may be extended to other enforcement and regulatory settings.