Book-tax conformity: empirical evidence from Germany


Zinn, Benedikt ; Spengel, Christoph


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URL: https://madoc.bib.uni-mannheim.de/32498
URN: urn:nbn:de:bsz:180-madoc-324985
Document Type: Working paper
Year of publication: 2012
The title of a journal, publication series: ZEW Discussion Papers
Volume: 12-051
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H20 , H25 , M41,
Subject headings (SWD): Deutschland , Steuervermeidung , Bilanz , Steuerbilanz , Körperschaftsteuer , Steuerbemessung
Keywords (English): Book-tax conformity , book-tax differences , tax planning
Abstract: We use a unique matched tax return - financial statement data set to examine the magnitude and sources of book-tax differences in Germany. For the first time, the data set enables us to evaluate the extent to which financial and tax accounting differ in Germany in the most accurate manner. Despite the close link between financial and tax accounting in Germany, we find that corporate taxable income and income reported to shareholders diverge considerably. Regression results suggest that this reporting gap is largely attributable to legal differences between financial and tax accounting and we cannot provide evidence that tax aggressive reporting adds to it. However, further analyses show that firms actively engaged in corporate restructuring exhibit larger book-tax differences than other firms. We interpret this result as evidence of firms willing to give up the administrative advantages of a one-book accounting system in order to achieve desired tax or financial accounting result, if book-tax conformity is not required. Thus, the results not only provide insights into the relatively unexplored area of behavioral response to changes in the degree of book-tax conformity, but also add a new perspective to the discussion surrounding the implementation of the German Accounting Law Modernization Act (BilMoG) in 2010.

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Zinn, Benedikt ; Spengel, Christoph (2012) Book-tax conformity: empirical evidence from Germany. Open Access ZEW Discussion Papers Mannheim 12-051 [Working paper]
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