The Use And Stop Of Tax-related Authentication

National tax authorities focus on improving the efficiency of taxation,and reducing the cost of taxation,the financial burden on the taxpayers,and taxpayers’ tax related risks.Many scholars have been exploring the information asymmetry between the tax authorities and taxpayers,and the game relation of both sides.What kind of tax mechanism can improve the efficiency of tax and narrow the information gap between the taxpayers and taxman?Different countries with different tax system also explore this problem.In 2005,China began allowing tax accountant firms and certified tax agents to issue authentication of enterprise income tax.Rules are made that tax authorities should admit verification report issued by them.More than ten years,tax accountant firms and certified tax agents issued a large amount verification reports of enterprise income tax for enterprises.Tax-related authentication business has become one of the main businesses in tax accountant firms.But at the same time,concerns about the authenticity of the verification reports,collusions between tax accountant firms and tax authorities,and problems of enforcement agency emerged.Therefore,authorities made rules to standardize the development of the tax-related authentication business,as well as to regulate the behaviors of certified tax agents.But in August 2016,State Administration of Taxation issued a notice to stop the authentication business.This paper,based on this phenomenon,constructs a principal-agent moral hazard model to discuss the reasons why tax authorities use tax accountant firms and certified tax agents for authentication business,and why they stop it.This paper explains this shift by using collusion between tax accountant firms and tax authorities and enforcement agency.Through this research,I hope to provide ideas for the improvement and development of Chinese verification mechanism about enterprise income tax,and provide implications for other authentication business.This paper,by constructing incentive model under complete information and incomplete information,finds that if information asymmetry exists,authorities has limited impact to encourage firms declare tax honestly.Therefore tax authorities need a third party to provide more information that can help them to narrow the information gap.Tax accountant firms and certified tax agents can issue verification reports to meet the requirements.By modeling the interactions between tax authorities,enterprises and tax accountant firms,this paper finds condition exists for verification reports to take effect,that is,the probability that tax accountant firms gives a verification report when enterprises declare tax truthfully is greater than the probability that tax accountant firms gives a verification report when enterprises declare tax dishonestly.In this way,tax accountant firms can provide valuable information for tax authorities.Therefore,this paper argues that information gap caused by information asymmetry between enterprises and tax authority is the reason why tax authorities use verification reports.However,verification reports take effect only under certain conditions.Since verification reports did not reduce the information gap between tax authorities and enterprises,it was stopped.To investigate its internal causes,this paper constructs two game models:one model is between tax accountant firms and enterprises,and the other is between tax authority and tax accountant firms,and found that collusion and forced agent lead to information failure of verification reports.This research topic is novel and study angle is unique.Domestic and overseas research mainly focused on relationship between taxman and taxpayer using game theory.Study of tax-related authentication is mainly concentrated on the influences of enterprises tax behaviors of providing verification reports.Using the principal-agent theory,this article constructs the moral hazard model to analysis the condition that tax-related authentication plays the role of information support and the cause of tax-related authentication failure.Therefore,this article is not only more systematic and complete in theoretical research,but also helpful for the improvement and development of China’s enterprise income tax verification mechanism in practical.