Will a departure from tax-based accounting encourage tax noncompliance? Archival evidence from a transition economy
AbstractWe 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.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Accounting and Economics.
Volume (Year): 50 (2010)
Issue (Month): 1 (May)
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Web page: http://www.elsevier.com/locate/jae
Book-tax differences IFRS Informativeness of book-tax differences Tax-based accounting system Tax noncompliance;
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