Corporation tax can influence a firm's operating and financial decisions, not only by the direct imposition of the tax itself, but also indirectly though associated compliance costs. Firms can attempt to reduce the impact of taxation, both through tax planning and by ensuring that compliance-related tasks are carried out efficiently.
It goes without saying that tax knowledge is an important determinate of successful corporate tax planning. Paradoxically, governments may also desire firms to be aware of, or sensitive to, tax legislation. This may be in order to reduce administrative and compliance costs and, if tax legislation is being employed as a public policy tool, to change or encourage particular actions or activities, such as investment in research and development-related activities.
An important dimension of an efficient tax system is the processes by which taxpayers become aware of tax legislation and other tax-related information, referred to for the purposes of this research as 'tax knowledge'.
The tax system and the market for tax knowledge
Within any tax system there are clearly identified participants. Their roles can be examined in the context of a market for knowledge, tax knowledge. Such markets typically consist of producers, buyers and brokers. In the UK, HM Revenue and Customs (HMRC) is the knowledge producer, corporate taxpayers are the knowledge buyers, while accountancy firms (and other similar parties) perform, in their role of tax advisers, the function of knowledge brokers. At various stages, the parties' roles may change; for example, in some settings corporate taxpayers may act as knowledge suppliers to accountancy firms acting as knowledge buyers.
A distinctive feature of the market for tax knowledge is that it can be described as relatively non-competitive when compared with other knowledge markets, such as management consultancy, where a far greater proportion of traded knowledge is proprietary. An important question is, therefore, the nature of the interactions between the three parties comprising the tax knowledge market. The aim of this research is to describe those interactions and provide a set of practical suggestions to improve the operation of this particular market.