The Audit of Deferred Taxes as a Signal for Tax Auditors: Tax Compliance Implications For Private and Public Firms

44 Pages Posted: 15 Mar 2018

See all articles by Kay Blaufus

Kay Blaufus

Leibniz Universität Hannover

Jens Robert Schöndube

Leibniz Universität Hannover

Stefan Wielenberg

Leibniz Universität Hannover

Date Written: March 29, 2017

Abstract

Using a tax compliance game, we study whether the observability of the taxpayer’s financial accounting information and the statutory auditor’s report affects the tax compliance. We find that firms’ responses differ significantly between private and public firms. Private firms compensate for the reported signals by understating both book and tax valuations. We find that introducing the informative signals does not necessarily increase efficiency. In fact, for private firms, it may also lead to lower tax revenues. For public firms, however, the positive effect of using the informative signals on tax compliance is much more pronounced. The usage of audit reports in addition to financial accounting statements always increases tax revenues from public firms. Regarding changes in book-tax conformity, we find that higher book-tax conformity can lead to higher tax revenues from public firms; however, tax revenues from private firms decrease with higher book-tax conformity.

Keywords: Tax Compliance Game, Tax Audit, Book-Tax Conformity, Strategic Auditing

JEL Classification: H26, M41, M42

Suggested Citation

Blaufus, Kay and Schöndube, Jens Robert and Wielenberg, Stefan, The Audit of Deferred Taxes as a Signal for Tax Auditors: Tax Compliance Implications For Private and Public Firms (March 29, 2017). Available at SSRN: https://ssrn.com/abstract=3141267 or http://dx.doi.org/10.2139/ssrn.3141267

Kay Blaufus

Leibniz Universität Hannover ( email )

Institut für Betriebswirtschaftliche Steuerlehre
Koenigsworther Platz 1
Hannover, 30167
Germany

Jens Robert Schöndube

Leibniz Universität Hannover ( email )

30167
Germany

Stefan Wielenberg (Contact Author)

Leibniz Universität Hannover ( email )

Institut fur Rechnungslegung und WP
Koenigsworther Platz 1
Hannover, 30167
Germany

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