Abstract
Purpose - The purpose of this study is to examine the effect of book-tax conformity on conforming tax avoidance and non-conforming tax avoidance. Design/methodology/approach - This study uses financial data from 1996 to 2019 of 34 countries. We regress conforming or non-conforming tax avoidance on book-tax conformity. We use the book-tax conformity measure developed by Atwood et al. (2010), the non-conforming tax avoidance measure developed by Desai and Dharmapala (2006), and the conforming tax avoidance measure developed by Badertscher et al. (2019). Findings First, book-tax conformity has a significant positive relationship with non-conforming tax avoidance. Second, book-tax conformity is not statistically related to conforming tax avoidance. Research implications or Originality While prior research focuses on the effect of book-tax conformity on earnings quality, we examine on the effect on tax avoidance. Furthermore, this study is expected to provide important policy implications regarding the types of tax avoidance strategies that tax authorities should pay attention to. Our results imply that tax authorities in countries with high book-tax conformity should pay more attention to non-conforming tax avoidance than to conforming tax avoidance.
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