The Resource Book-tax conformity : implications for multinational firms

Book-tax conformity : implications for multinational firms

Label
Book-tax conformity : implications for multinational firms
Title
Book-tax conformity : implications for multinational firms
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Language
eng
Summary
This paper examines the implications for multinational firms of proposals to conform tax and financial reporting (i.e., book-tax conformity). Proponents of book-tax conformity argue that the current dual system in the U.S. allows firms to simultaneously manage their taxable income downward while managing their book income upward. By requiring book-tax conformity, they contend that firms will be forced to trade off reporting high earnings numbers to shareholders and reporting low earnings to the taxing authority, resulting in improved financial reporting and less tax avoidance. Reduced compliance costs and easier auditing have also been cited as potential benefits of book-tax conformity. However, before one can evaluate the costs and benefits of book-tax conformity it is necessary to understand international implications of conformity, particularly regarding the foreign operations of U.S. multinationals. The authors describe several possible approaches to implementing book-tax conformity for firms that have both domestic and foreign operations. They discuss issues likely to arise with each approach and conjecture at the behavioural responses to each. Using firm-level financial data from Compustat, they simulate the effects of book-tax conformity on publicly traded U.S. firms. Specifically, they simulate the effects of book-tax conformity on the level and variability of tax payments/collections
Citation source
In: National tax journal. - Washington. - Vol. 62 (2009),
Language note
English
Label
Book-tax conformity : implications for multinational firms
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Publication
Label
Book-tax conformity : implications for multinational firms
Publication

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