Will a departure from tax-based accounting encourage tax noncompliance? Archival evidence from a transition economy

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

56 Scopus Citations
View graph of relations

Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)58-73
Journal / PublicationJournal of Accounting and Economics
Volume50
Issue number1
Publication statusPublished - May 2010
Externally publishedYes

Abstract

We investigate whether a departure from a tax-based accounting system toward the adoption of International Financial Reporting Standards encourages tax noncompliance. We also examine whether such a departure, which weakens book-tax conformity, affects the informativeness of book-tax differences for tax noncompliance. Our evidence suggests that as book-tax conformity decreases, tax noncompliance increases. Although book-tax differences remain informative of tax noncompliance, the informativeness attenuates as book-tax conformity weakens. Additionally, firms with high incentives to inflate book income are more tax compliant than their counterparts after the departure from a tax-based accounting system. © 2010 Elsevier B.V.

Research Area(s)

  • Book-tax differences, H26, IFRS, Informativeness of book-tax differences, Tax noncompliance, Tax-based accounting system