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Abstract
This thesis considers the Australian Tax Office’s use of the Risk Differentiation Framework and tax risk bow-tie approach to the compliance tax risk management of large corporations in Australia during the period 2008‒2015, from a design science research perspective. Large corporate groups, the roughly 1500 economic groups with a turnover of more than $250m AUD per annum, dominate economic activity and maintaining and improving their tax compliance is both highly important in its own right and as a key influential equity factor for other taxpayers. Most models of compliance behaviour ‒ economic, psychological and sociological ‒ treat tax compliance as a relatively binary activity of fairly homogenous taxpayers. By contrast large corporations, defined as a diverse highly skewed population of well-advised economic groups, believe they are very compliant and in practice their compliance usually turns on differing interpretations of how ambiguous law applies to a few complex transactions and structures, often across jurisdictional borders.
The thesis reviews historic approaches to the modelling of tax compliance risk and then contemporary models of why people and entities comply, identifying a key gap in the academic literature relating to the management of ambiguous compliance in highly skewed populations. After examining the operating context of large corporations’ compliance from 1986 to 2007, largely an enforcement-focused viewpoint mired in auditing past arrangements, the thesis then details the development and implementation of the risk differentiation framework and tax risk bow-tie artefacts created by the author to address the knowledge gap identified. The impact of the use of these artefacts is then reviewed from a number of perspectives: Did it change the large corporate tax gap? Did it change the effectiveness of the ATO’s risk management of large corporations? The evaluation shows that a change in the compliance levels and engagement of large corporates occurred, but ascribing causality for the change is not definitively possible. The thesis concludes by reviewing the contributions made to the literature and identifying future research possibilities.