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

K. Hung Chan, Kenny Z. Lin and Phyllis L.L. Mo

Journal of Accounting and Economics, 2010, vol. 50, issue 1, 58-73

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.

Keywords: Book-tax; differences; IFRS; Informativeness; of; book-tax; differences; Tax-based; accounting; system; Tax; noncompliance (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:50:y:2010:i:1:p:58-73

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