The roles of book-tax conformity and tax enforcement in regulating tax reporting behaviour following International Financial Reporting Standards adoption

Ester Chen, Ilanit Gavious

Research output: Contribution to journalArticlepeer-review

8 Scopus citations

Abstract

This study investigates whether increasing the level of tax enforcement can potentially offset the primary cost of a reduction in the level of book-tax conformity (BTC) following International Financial Reporting Standards (IFRS) adoption – increased tax avoidance. We find that after the decrease in BTC and the concomitant increase in tax enforcement that followed IFRS adoption in Israel, tax avoidance declined significantly. Our results imply that one of the primary costs of reducing BTC can be avoided. Moreover, the results suggest that rather than one strict regulatory approach to deal with reporting manipulations, a combination of trust and control is more effective and less radical.

Original languageEnglish
Pages (from-to)681-699
Number of pages19
JournalAccounting and Finance
Volume57
Issue number3
DOIs
StatePublished - 1 Sep 2017

Keywords

  • Book-tax conformity
  • Earnings management
  • International Financial Reporting Standards
  • Regulation
  • Tax avoidance

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)

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