Earnings Management Model and Tax Avoidance by using Aggressive Tax Policy Strategies, Deferred Tax Asset and Deferred Tax Liability

Document Type : Original Article

Authors

• Vahid Tavasoli ¹
• Yadollah Tariverdi ²
• Farzaneh Heidarpoor ³

¹ Ph.D Student, Accounting Group, Tehran Branch, Islamic Azad University,Tehran, Iran,

² Assistant Professor, Accounting Group, Tehran Branch, Islamic Azad University,Tehran, Iran

³ Professor, Accounting Group, Tehran Branch, Islamic Azad University,Tehran, Iran

Abstract

Purpose: The aim of the research is to examine the challenge of whether deferred taxes resulting from financial statements reported based on accounting standard 35 are a strategy for managers to achieve tax avoidance or not. And whether the tax policy is aggressive derived from this standard as a tool for earnings management or not.

Research method: To achieve the goal of the research, the data of 169 sample companies from the Tehran Stock Exchange, in the period of 2016-2021, were collected using the systematic elimination approach and were analyzed by means of descriptive-correlation analysis with the implementation of logistic regression test.

Findings: The findings showed that aggressive tax policy has no effect on earnings management. Also, deferred tax assets have an effect on tax avoidance, but deferred tax liabilities have no effect on tax avoidance.

Discussion and conclusion: The most recent amendment of accounting standards in Iran is the application of accounting standard 35, which is derived from international accounting standards and significantly increases the requirements for identifying and disclosing information for deferred taxes. The motivation for using deferred tax assets and liabilities to identify earnings management and tax avoidance is that there is usually more discretion in generally accepted accounting principles than in tax laws. Therefore, managers may change the company's tax policy and manipulate earnings by using deferred taxes. Therefore, in the current research, evidence of the effect of deferred tax assets on tax avoidance has been obtained.

Keywords

• earnings management. tax avoidance
• tax policy
• deferred tax asset
• deferred tax liability

Main Subjects

• Economic and financial markets

---