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

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  • Chih-Wen Mao

    (National Taipei University of Business)

  • Wen-Chieh Wu

    (National Chengchi University)

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.

Suggested Citation

  • Chih-Wen Mao & Wen-Chieh Wu, 2019. "Does the government-mandated adoption of international financial reporting standards reduce income tax revenue?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(1), pages 145-166, February.
    • Handle: RePEc:kap:itaxpf:v:26:y:2019:i:1:d:10.1007_s10797-018-9495-2
    DOI: 10.1007/s10797-018-9495-2
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    More about this item

    Keywords

    International Financial Reporting Standards; Income tax revenue; Propensity score matching; Difference-in-differences;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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