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Will a departure from tax-based accounting encourage tax noncompliance? Archival evidence from a transition economy
Journal of Accounting and Economics (2010)
  • Koon Hung CHAN
  • Kenny Z. LIN
  • Phyllis L.L. MO
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.

Publication Date
May, 2010
Citation Information
Chan, K. H., Lin, K. Z., & Mo, P. L. L. (2010). Will a departure from tax-based accounting encourage tax noncompliance? Archival evidence from a transition economy. Journal of Accounting and Economics, 50(1), 58-73. doi: 10.1016/j.jacceco.2010.02.001