Effect of tax burden on income management

Abstract

Based on the characteristics of the Chinese market and the Chinese institutions, this paper intends to use the account error correction data to study the relationship between income management and tax burden. As revealed in the study, the underlying goal of income management for listed companies is the alleged increase in profits. However, most companies do not pay extra taxes, on the contrary, they reduce the tax report. There is a small amount of taxation on accounting income, so tax cuts may be attributed to profit management rather than objectives. The implication of this phenomenon is that the analysis of tax differences may be a useful tool for regulators to investigate income management behavior, investor and CPA assessment of accounting information quality, and tax authorities to supervise tax reporting.