Study On The Tax-induced Creative Accounting

Tax planning is in the early 1990s, from the western developed countries into China, but over the past decade, either in theory or in practice with amazing speed development, almost all of the taxpayers want to use this activity as strive for the best interests of their own taxes. However, currently prevalent corporate income tax planning methods, some are to guide taxpayers to take full advantage of the various tax incentives to reduce the tax burden, while others are to guide them to make use of the flexibilities, loopholes and differences in our tax laws and accounting standards to cut down the income tax expenses through the manipulation of accounting statements or arrangements for true business transactions. Pre-class tax planning tools, because the allocation of resources to achieve the government target will be the government's encouragement and risk-free. While post-class tax planning means, in its essence is a Tax-induced creative accounting behavior, not only threaten the integrity of financial reporting systems, erose of basic moral standards of society, endanger the state's tax order, but also taxpayers will be into high tax-related risk areas. So the correct definition of Tax-induced creative accounting meaning, nature, analyses of their motivation and institutional incentives, study their common used methods and forecast the economic consequences of their cause are of great theoretical and practical significance. The conclusions and the innovations are as follows:Firstly, Paper apply limited rational economic man theory, tax contract theory, games theory, finance and tax accounting theory to analyse motivations of Tax-induced creative accounting, which reveals that rational economic man to pursue their own interests and tax savings can improve the company's market value are the behavior benefits motivation, the government introduced tax contract lag, the asymmetric information between taxcollectors and taxpayers, tax incompleteness of contracts and book-tax differences are the system incentives. And from detailed analysis, the paper point out the opportunism incentives existing in business accounting standards and corporate income tax system may lead to three specific Tax-induced creative accounting.Secondly, Study how tax reform effect creative accunting of China listed company. Empirical results support the hypothesis that the occasion of changes in tax rates, the company manipulate the total accruals and low book-tax accruals to improve the potential tax benefits or reduce the potential tax loss, but did not support companies manipulation of high book-tax accruals to reduce financial reporting cost arising from discretionary low book-tax accruals. Moreover, it was also found that companies with big tax reduction does not increase accruals manipulation to achieve more tax benefit; Firms manipulated total accruals and low book-tax accruals upword to achieve domestic equipment investment tax credit as soon as possible.; Compared to other state-owned holding firms, state-controlled-stake firms did more manipulation of accruals to get tax benefits; Government subsidies in tax-rate-declined firms has significant negative relation to total accruals and low book-tax accruals in some quantile,which proved that firms with large government subsidies will reduce other forms of earnings manipulation; For political purposes, big aize firms are more willing to manipulate the total accruals and low book-tax accruals upward.Thirdly, Empirical results support the theoretical analysis of the ETRs restricting upward manipulation of the company's total accruals and low book-tax accruals, but did not find companies to make use of book-tax specific differences, by giving priority to low-income tax costs of transactions or the manipulation of the accruals with low-income tax cost to reduce the tax costs of financial reporting. By analyse the content of high book-tax accruals, the author found the regulatory policy of non-recurring profit and loss may be the main reason for the result.Fourthly, Through individual case studies and use tax assessment of technical methods, the author found that when the existence of subsidiaries to enjoy preferential rates of tax, high-tax-ETRs company will transfer internal profits to low-ETRs company in order to reduce the overall income tax expense of listed companies, and found that ETRs is a valid income tax assessment indicators.Lastly, the paper evaluate and predict the economic consequences of tax-induced creative accounting on earnings persistence. By regression modeling paper found that Tax-induced creative accounting to inter-period transfer taxable income and internal income transfers to low-ETRs subsidiaries, the existence of enjoyment of tax preferential rates subsidaries, enjoyment of tax credits will significantly reduce the company's ETRs, Of the three types of high book-tax accruals, only provision for impairment loss have a significantly positive impact on the ETRs.There are 4 figures, 48 tables and 156 references in the dissertation.