Wages and prices in Europe before and after the onset of the Monetary Union

Giovanna Gavana, Gabriele Guggiola and Anna Marenzi
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Giovanna Gavana: Department of Economics, University of Insubria, Italy
Gabriele Guggiola: Department of Economics, University of Insubria, Italy

Economics and Quantitative Methods from Department of Economics, University of Insubria

Abstract: Does the adoption of IFRS (International Financial Reporting Standards) by E.U. countries result in a reduction or in an increase of the degree of alignment between tax and financial reporting? What are the potential tax effects if IFRS were used as the basis for corporate taxation? We address these issues in the context of the Italian accounting and taxation systems. Italy is one of the European countries with a closer linkage between financial and tax accounting and where there are relevant conceptual differences between the domestic accounting framework and the IFRS framework. As a consequence, the choice of extending IFRS to the annual accounts of certain types of companies has immediately implied a problem of mismatch between the new set of accounting standards and tax rules. After a three years parenthesis of tax neutrality, Finance Act 2008 established that the tax base of regional business tax (Irap) is exclusively driven by financial reporting, regardless of the set of accounting standards adopted, domestic Gaap or IFRS. The paper compares the recognition and measurement criteria proper to Italian Gaap and IFRS potentially responsible for a different Irap tax burden among taxpayers. We propose a framework to detect the expected effects that, in principle, might affect the measure of the specific items included in the Irap base; afterwards, using a sample of Italian listed companies, we empirically test the departure from the tax neutrality principle.

Keywords: Taxation; Accounting; International Financial Reporting Standards (IFRS), Italy (search for similar items in EconPapers)
Pages: 27 pages JEL Classification: H20, H25, M41
Date: 2010-12
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