IDEAS home Printed from https://ideas.repec.org/a/ctf/journl/v67y2019i4p947.html
   My bibliography  Save this article

Did the Adoption of IFRS Affect Corporate Tax Avoidance?

Author

Listed:
  • Oliver Nnamdi Okafor

    (Ted Rogers School of Management, Ryerson University, Toronto)

  • Akinloye Akindayomi

    (Robert C. Vackar College of Business and Entrepreneurship, The University of Texas Rio Grande Valley)

  • Hussein Warsame

    (Haskayne School of Business, University of Calgary)

Abstract

This article investigates whether the adoption of international financial reporting standards (IFRS) affected corporate tax avoidance in Canada. Based on a 3,200 firm-year data set of 400 publicly listed Canadian firms that adopted IFRS and 400 listed US firms, matched one-to-one using propensity score matching, the authors' regression results show that IFRS adoption was followed by a decrease in corporate tax avoidance in Canada, at least in the short run. The study finds a significant increase in cash tax paid in the post-adoption period by Canadian firms that adopted IFRS compared to US firms that used US generally accepted accounting principles. Additional regression results based on a small control sample of Canadian firms that did not adopt IFRS present collaborative evidence. The authors further test specific taxpayer attributes and accounting issues identified in Canada Revenue Agency internal memorandums—in particular, concerns that the adoption of IFRS may increase the risk of tax avoidance. While the authors find evidence that the IFRS firms that engaged in accrual management paid more taxes in the post-adoption period, their analysis provides no evidence of statistically significant relationships between IFRS adoption and tax avoidance associated with revenue management, ownership of foreign operations, industry membership, profitability, or impairment losses or writeoffs. Taken together, the authors' findings present preliminary but strong empirical evidence that IFRS adoption is associated with a decrease in corporate tax avoidance, at least in the short run.

Suggested Citation

  • Oliver Nnamdi Okafor & Akinloye Akindayomi & Hussein Warsame, 2019. "Did the Adoption of IFRS Affect Corporate Tax Avoidance?," Canadian Tax Journal, Canadian Tax Foundation, vol. 67(4), pages 947-979.
  • Handle: RePEc:ctf:journl:v:67:y:2019:i:4:p:947
    DOI: https://doi.org/10.32721/ctj.2019.67.4.okafor
    as

    Download full text from publisher

    File URL: https://www.ctf.ca/EN/Publications/CTJ_Contents/2019CTJ4.aspx
    Download Restriction: no

    File URL: https://libkey.io/https://doi.org/10.32721/ctj.2019.67.4.okafor?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Athira, A. & Ramesh, Vishnu K., 2023. "COVID-19 and corporate tax avoidance: International evidence," International Business Review, Elsevier, vol. 32(4).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ctf:journl:v:67:y:2019:i:4:p:947. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jim Lyons (email available below). General contact details of provider: https://www.ctf.ca/EN .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.