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The roles of book‐tax conformity and tax enforcement in regulating tax reporting behaviour following International Financial Reporting Standards adoption
Author(s) -
Chen Ester,
Gavious Ilanit
Publication year - 2017
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12172
Subject(s) - conformity , enforcement , business , accounting , tax avoidance , public economics , offset (computer science) , international financial reporting standards , finance , monetary economics , double taxation , economics , political science , law , computer science , programming language
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.