Implementing problematic tax regulation: Hysteresis and bureaucratic revolutionaries within tax administrations |
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| Affiliation: | 1. Department of Management Control and Information Systems, School of Economics and Business, Universidad de Chile, Diagonal Paraguay # 257, Santiago, 8330015, Chile;2. Department of Finance and Accounting, University of Exeter Business School, Streatham Court, Rennes Drive Exeter, EX4 4PU, UK;1. Department of Management, Ca’ Foscari University, Venice, Italy;2. University of Aberdeen Business School, Aberdeen, UK;1. Manning School of Business, University of Massachusetts Lowell, 72 University Ave, Lowell, MA, 01854, USA;2. Lally School of Management, Rensselaer Polytechnic Institute, USA;3. School of Accounting and Finance, Hong Kong Polytechnic University, Hong Kong;4. Kogod School of Business, American University, USA;1. Accounting and Finance Department, University of Leeds, Leeds, LS2 9JT, United Kingdom;2. Finance and Accounting Department, Adnan Kassar School of Business, Lebanese American University, Chouran, Beirut, 1102 2801, Lebanon;3. School of Economics and Business Administration, International Hellenic University, 14th klm Thessaloniki-Moudania, 57101, Thessaloniki, Greece;4. University of Bristol Business School, University of Bristol, Priory Road, Bristol BS8 1TN, United Kingdom |
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| Abstract: | Worldwide emerging demands for additional and more sophisticated regulation are triggering regulatory changes at the national level that not all tax authorities are prepared to implement effectively. We examine this phenomenon through a single case study concerned with the implementation of the problematic transfer pricing rule by the Chilean tax authority. Drawing on semi-structured interviews, other qualitative sources, and inspired by the lesser used Bourdieusian constructs of hysteresis and bureaucratic revolutionaries, we unravel the emergence, persistence and resolution of hysteresis, i.e., a misalignment between tax administration practices and the expectations imposed on that organisation within the broader tax field. The paper finds that attempts to internationalise the tax system when regulators were inexperienced gave rise to hysteresis. It also explores how the standard of the rule, in conjunction with other structural conditions, influenced the decisions of senior tax officials, thus contributing to the persistence of hysteresis within the tax authority. Finally, it illustrates how one very senior tax official, with an interest in the regulation, acted as a bureaucratic revolutionary to resolve hysteresis and make the rule work in practice. |
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| Keywords: | Tax administration Regulation Complexity Hysteresis Bureaucratic revolutionaries Interest |
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