The US Compliance Assurance Process: A Relational Signalling Perspective

Dennis de Widt, Emer Mulligan, Lynne Oats


Cooperative compliance programmes have been introduced in various tax jurisdictions, with its pioneers including Australia, Denmark, Ireland, the Netherlands, the UK and the US. Such programmes are part of a wider trend in regulatory systems that emerged in the 1980s, and attempt to better balance interests between the tax authority and corporate taxpayers, and seek to reflect a more collaborative working method, as promoted by the Organisation for Economic Co-operation and Development (OECD). This paper examines the US cooperative compliance arrangement, known as the Compliance Assurance Process (CAP), and probes the nature of the relationship that ensues between the regulator and regulatee under CAP, the motivations of each party to the arrangement, and the manner in which the relationship is (or is not) sustained. This paper sheds light on such matters pertaining to CAP by examining its evolution and operation through the lens of regulation theory, drawing in particular on the work of Etienne (2013), who develops a typology of ideal type interactions and relational signals in regulatory settings. It is also informed by interview data from two separate studies involving interviews with senior in-house tax executives/advisors. Drawing on Etienne’s typology facilitates a better understanding of the limits of cooperative compliance in the context of large businesses, particularly in the US environment. This paper shows the importance of adequately capturing the motivations of regulator and regulatee, demonstrating they do not carry equal weight nor have they remained stable over time, and addresses the implications of these differences for the success of an initiative such as CAP. It also demonstrates that interactions between regulator and regulatee follow multiple logics, and highlights and critiques the high level of interaction required, especially during the initial stage of responsive regulation-based relationships. The paper concludes with some broader considerations around regulator-regulatee relationships, including the potential role for recent technological innovations in this context.

Keywords: cooperative compliance, Compliance Assurance Process, responsive regulation, Etienne

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