— Prior literature provides evidence consistent with one book and tax system (the strong dependence between tax and book income) leads to a decrease in opportunistic behaviour by a company´s managers and allow tax authorities to further control a company´s reported earnings. Book and tax income was practically separated in 2005 for compulsory or mandatory users of IFRS in the Czech Republic. Using the effective tax rate and book-tax differences I find a greater increase/decrease after the year 2005 in comparison with the period before for companies using IFRS compared others. I interpret this evidence as indicating that two separate systems (book and tax) could lead to managers manipulating earnings and tax aggressiveness as both at once.
— IFRS, tax base, book income, effective tax rate, book-tax differences.
S. Jiraskova is with the University of Economics, Prague, Czech Republic, the Department of Financial Accounting and Auditing (e-mail: qjirs01@ vse.cz).
Cite: S. Jiraskova, " The Relationship between Tax and Book Income after Adoption IFRS in the Czech Republic in Comparison with Other European Countries," Journal of Economics, Business and Management vol. 3, no. 12, pp. 1180-1184, 2015.