Book-tax conformity: Empirical evidence from Germany
AbstractWe use a unique matched tax return-financial statement data set to examine the magnitude and sources of book-tax differences in Germany. For the first time, the data set enables us to evaluate the extent to which financial and tax accounting differ in Germany in the most accurate manner. Despite the close link between financial and tax accounting in Germany, we find that corporate taxable income and income reported to shareholders diverge considerably. Regression results suggest that this reporting gap is largely attributable to legal differences between financial and tax accounting and we cannot provide evidence that tax aggressive reporting adds to it. However, further analyses show that firms actively engaged in corporate restructuring exhibit larger book-tax differences than other firms. We interpret this result as evidence of firms willing to give up the administrative advantages of a one-book accounting system in order to achieve desired tax or financial accounting result, if book-tax conformity is not required. Thus, the results not only provide insights into the relatively unexplored area of behavioral response to changes in the degree of book-tax conformity, but also add a new perspective to the discussion surrounding the implementation of the German Accounting Law Modernization Act (BilMoG) in 2010. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 12-051.
Date of creation: 2012
Date of revision:
book-tax conformity; book-tax differences; tax planning;
Find related papers by JEL classification:
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-09-03 (Accounting & Auditing)
- NEP-ALL-2012-09-03 (All new papers)
- NEP-PUB-2012-09-03 (Public Finance)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.