The Relation between Financial and Tax Reporting Measures of Income

By Gil B. Manzon, G. Plesko. 2001

562 citations recorded by the source corpus.

We examine the magnitude and sources of difference between income for tax and financial reporting purposes using publicly available data from 1988 to 1998. We find evidence that the book-tax income spread has generally increased over time, but that a relatively small set of variables are able to explain this increase. We also find that these same variables explain a large percentage of the variation in the book-tax spread across firms. While neither supporting, nor disproving, the existence and growth in tax sheltering behavior, the results do suggest that financial statement-based measures of income have become less representative of firms' taxable income.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/b13197e82eca2fc0db840d06a23a453d19f4f59a

Citations in the corpus

• Does Corporate Social Responsibility Affect Corporate Tax Aggressiveness (2015, unknown): “Following the method in Manzon and Plesko (2002), BTG1 is computed as pre-tax accounting income less taxable income scaled by total assets, with taxable income calculated as income tax expense divided by the statutory maximum corporate tax rate of 33.1/3%.”
• Trends in Book-Tax Income and Balance Sheet Differences (2002, unknown): “Further, book-tax consolidation differences, particularly for multinational corporations, could generate much of the gap (Mills and Newberry 2000, Manzon and Plesko 2002).”
• Long-Run Corporate Tax Avoidance (2008, unknown): “…including examining book-tax differences for the aggregate corporate sector (U.S. Treasury, 1999), in publicly-traded firms (Plesko, 2000; Manzon and Plesko, 2002; Desai, 2003; Yin, 2003; Hanlon and Shevlin, 2005; and Hanlon, Kelley and Shevlin, 2005) and using tabulated tax return data…”
• The Spread of Aggressive Corporate Tax Reporting: A Detailed Examination of the Corporate-Owned Life Insurance Shelter (2011, unknown): “4 taxable income is evidence of increased corporate tax shelter activity, but Manzon and Plesko (2002) are unable to confirm the link between the increase in book-tax differences and the reported increase in shelter activity.”
• Does Information Asymmetry Affect Corporate Tax Aggressiveness? (2017, unknown): “Based on Manzon and Plesko (2002).”
• Is Corporate Social Responsibility Performance Associated with Tax Avoidance? (2014, unknown): “As per Manzon and Plesko (2002), we evaluate the raw book-tax difference, which is calculated as pre-tax accounting income less taxable income scaled by lagged total assets.”