A Comparison of Tax Professionals' Individual and Group Decisions When Resolving Ambiguous Tax Questions.

Abstract This study examines the impact of group discussion on the probability of tax professionals taking tax return positions desired by clients in gray areas" of the tax law. Based on previous psychological research on choice shifts and group polarization, group discussion is expected to lead to higher, more risky tax return positions in scenarios characterized initially by high probabilities of taking the tax return position desired by the client. In contrast, group discussion is expected to lead to lower, more conservative tax return positions in scenarios characterized initially by low probabilities. In experiment one, six ambiguous scenarios (three high-probability and three low-probability) were presented to a group of tax partners and managers. Subjects were assigned to groups and asked to evaluate each scenario before and after a group discussion. In experiment two, experiment one was replicated using two scenarios with relevant tax law added. This provided subjects with a more realistic task. In general, the results provide support for the notion that group discussion may lead to either risky or conservative shifts in tax professionals' decisions. In experiment one, discussion led to a risky, pro-taxpayer shift in all three high-probability scenarios and a conservative, pro-IRS shift in two of three low-probability scenarios. The addition of tax law in experiment two did not change our conclusions.