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|Other Titles: ||An Estimation Model of Taxable Income|
Book-Tax Income Differences;Taxable Income;Estimation of Taxable Income;Unbiased Estimator
|Issue Date: ||2014-02-19 16:53:03 (UTC+8)|
The growing differences between financial income and taxable income have attracted many researchers' attention. Recently, many studies aim to explore the implications of book-tax income differences, including addressing the relationship between book-tax income differences and earnings management, and examining the incremental information revealed by book-tax income differences. However, due to confidentiality of tax return data, most previous studies use financial statement data to estimate taxable income variable in the regression models. However, prior studies show that there exist nontrivial biases in using financial statement data to estimate taxable income. These potential biases not only place a restriction on accounting research that requires taxable income data but also cause results in prior studies inconclusive. Taiwan's income tax system is less complicated than the U.S. system. Moreover, Taiwan's listed companies disclose detailed tax information in financial statements, providing a research opportunity to overcome the limitation on the availability of taxable income data. Therefore, this paper constructs an estimation model for estimating taxable income by using financial statement data of Taiwan's listed companies and their detailed disclosures on income tax expenses. This paper also uses tax return data of Taiwan's listed companies to test whether the constructed estimation model is consistent with an unbiased estimator. Considering Taiwan's income tax law, the estimation model of this paper, to reduce estimation errors in estimating taxable income, adjusts the potential biases in income tax expenses that reported in financial statements, including (1) a 10% of surtax on undistributed earnings, (2) investment tax credits, and (3) the amount of operating losses carried forward. The testing results show that the estimated taxable income and actual taxable income in tax return are not significantly different, and that the constructed estimation model is consistent with an unbiased estimator. Further the goodness of fit of the regression models is of no significant differences in applying the estimation model to the samples between electronic and nonelectric firms, and between firms with high- and low-R&D intensities. The results suggest that the constructed estimation model is applicable to companies within different industries that may differ in opportunities of obtaining investment tax credits (e.g., electronics vs. traditional industries). Likewise, the estimation model is also applicable to firms that differ in R&D intensities as well as R&D tax credits. Financial statements are publicly and periodically available data. This paper contributes to research on book-tax income differences and corporate tax research by providing an unbiased estimation method for researchers to estimate taxable income of Taiwan's listed companies by using financial statement data.
|Relation: ||管理學報, 26(6), 625-636|
|Data Type: ||article|
|Appears in Collections:||[會計學系] 期刊論文|
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