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Does the government-mandated adoption of international financial reporting standards reduce income tax revenue?

Chih-Wen Mao () and Wen-Chieh Wu ()
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Chih-Wen Mao: National Taipei University of Business
Wen-Chieh Wu: National Chengchi University

International Tax and Public Finance, 2019, vol. 26, issue 1, 145-166

Abstract: Abstract The mandatory adoption of International Financial Reporting Standards (IFRS) has been the most noteworthy accounting regulatory change in a multitude of countries. After adopting IFRS, the gap between accounting earnings and taxable income increases in most of these countries. Previous literature suggests that low book-tax conformity is associated with higher corporate tax avoidance, thereby collecting lower income tax revenues. This study applies the propensity score matching method and the difference-in-differences design to empirically examine the impact of the government-mandated adoption of IFRS on a country’s income tax revenue. Using panel data of 137 countries covering the period from 2000 to 2010, the empirical results show that the mandatory IFRS adoption results in a decrease in income tax revenue.

Keywords: International Financial Reporting Standards; Income tax revenue; Propensity score matching; Difference-in-differences (search for similar items in EconPapers)
JEL-codes: M40 M48 H26 F60 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:kap:itaxpf:v:26:y:2019:i:1:d:10.1007_s10797-018-9495-2