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

Author

Listed:
  • Giovanna Gavana

    (Department of Economics, University of Insubria, Italy)

  • Gabriele Guggiola

    (Department of Economics, University of Insubria, Italy)

  • Anna Marenzi

    (Department of Economics, University of Insubria, Italy)

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.

Suggested Citation

  • Giovanna Gavana & Gabriele Guggiola & Anna Marenzi, 2010. "Wages and prices in Europe before and after the onset of the Monetary Union," Economics and Quantitative Methods qf1010, Department of Economics, University of Insubria.
    • Handle: RePEc:ins:quaeco:qf1010
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    File URL: https://www.eco.uninsubria.it/RePEc/pdf/QF2010_10.pdf
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    References listed on IDEAS

    as
    1. Oestreicher, Andreas & Spengel, Christoph, 2007. "Tax Harmonisation in Europe: The Determination of Corporate Taxable Income in the EU Member States," ZEW Discussion Papers 07-035, ZEW - Leibniz Centre for European Economic Research.
    2. Christopher Nobes & Hans Robert Schwencke, 2006. "Modelling the links between tax and financial reporting: A longitudinal examination of norway over 30 years up to IFRS adoption," European Accounting Review, Taylor & Francis Journals, vol. 15(1), pages 63-87.
    3. Eva Eberhartinger & Margret Klostermann, 2007. "What if IFRS were a Tax Base? New Empirical Evidence from an Austrian Perspective," Accounting in Europe, Taylor & Francis Journals, vol. 4(2), pages 141-168, December.
    4. Margaret Lamb & Christopher Nobes & Alan Roberts, 1998. "International Variations in the Connections Between Tax and Financial Reporting," Accounting and Business Research, Taylor & Francis Journals, vol. 28(3), pages 173-188, March.
    5. Fulvia Rocchi, 1996. "Accounting and taxation in Italy," European Accounting Review, Taylor & Francis Journals, vol. 5(1), pages 981-989.
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