The Relation between Financial and Tax Reporting Measures of Income

Posted: 15 May 2002

See all articles by Gil B. Manzon, Jr.

Gil B. Manzon, Jr.

Boston College

George A. Plesko

University of Connecticut School of Business

Multiple version iconThere are 2 versions of this paper

Abstract

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, but in predictable ways.

JEL Classification: M41, K34, H25

Suggested Citation

Manzon, Gil B. and Plesko, George A., The Relation between Financial and Tax Reporting Measures of Income. Tax Law Review, Vol. 55, No. 2, 2002. Available at SSRN: https://ssrn.com/abstract=312185

Gil B. Manzon

Boston College ( email )

Chestnut Hill, MA 02167
United States

George A. Plesko (Contact Author)

University of Connecticut School of Business ( email )

School of Business
Storrs, CT 06269-2041
United States
860-486-6421 (Phone)

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