Journal of Industrial and Systems Engineering

Journal of Industrial and Systems Engineering

The Role of Accounting Standards in Tax Avoidance Incentives and Opportunities

Document Type : Research Paper

Authors
Tahereh Abedian 1
Seyed Yousef Ahad Serkani 2
Mohammad Mahmoodi 3
1 PhD Student, Department Of Accounting ,M.M, Islamic Azad University, Firozkooh, Iran
2 Department Of Accounting, S.Y.A.S, Islamic Azad University, Firozkooh, Iran
3 Assistant Professor, Department Of Accounting ,M.M, Islamic Azad University, Firozkooh, Iran
Abstract
Tax avoidance is a critical challenge facing tax and accounting systems globally, as it undermines financial transparency, reduces investment efficiency, and weakens corporate competitiveness. This study aims to explore the role of accounting standards in influencing the motivations and opportunities for tax avoidance. Initially, various motivations for tax avoidance—such as ambition, rewards, fear, power, competence, attitudes, creativity, and others—were identified and grouped into three analytical levels. Subsequently, the study analyzed the opportunities for tax avoidance, including the impact of accounting standards in reducing incentives, improving investment efficiency, maintaining future cash flows, lowering capital costs, manipulating profits, and enhancing competitive advantage, across four levels.
The research focuses on the year 2024 and is based on expert input from members of accounting standards-setting committees, senior managers and supervisors of the Audit Organization, and tax professionals with high academic and practical qualifications. Using a structured analysis, the study reveals that effective accounting standards play a vital role in reducing both the motivations and the opportunities for tax avoidance by increasing financial transparency and limiting earnings management practices.
Moreover, the findings suggest that tax policies based on strong oversight and the implementation of modern accounting technologies can significantly decrease tax violations and contribute to the financial health and sustainability of companies. As a result, the study presents a conceptual model that clarifies the relationship between accounting standards and tax avoidance, offering practical recommendations for managers, policymakers, and future researchers to enhance tax compliance and economic performance.
Keywords
Accounting Standards
Tax Avoidance
Tax Incentives
Subjects
Abedini, G., & Darabi, R. (2024). The relationship between tax avoidance and the specialization of audit firm partners and audit committee members. Public Sector Accounting and Budgeting Journal, 5(3), 37-56. https://doi.org/10.22034/psab.2024.200889
Agyei, S. K., Marfo-Yiadom, E., Ansong, A., & Idun, A. A. A. (2020). Corporate tax avoidance incentives of banks in Ghana. Journal of African Business, 21(4), 544–559. https://doi.org/10.1080/15228916.2019.1695183
Ali-Ahmadi, S., & Soroush-Yar, A. (2016). Assessing the role of accounting standards formulation approaches and auditor expertise in aggressive financial reporting. Financial Accounting Journal, 8(30), 142-161. https://sid.ir/paper/508294/fa
Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). International accounting standards and accounting quality. Journal of Accounting Research, 46(3), 467-498.
Bosse, M., Lee, T., Swinson, M., & Faulconer, J. (2010). The NCTM process standards and the five Es of science: Connecting math and science. School Science and Mathematics, 110(6), 262–276. https://doi.org/10.1111/j.1949-8594.2010.00033.x
Chettri, K. K., Bhattarai, J. K., & Gautam, R. (2023). Determinants of tax revenue in South Asian countries. Global Business Review, 1(1), 09721509231177784. https://doi.org/10.1177/09721509231177784
Cowx, M., & Vernon, M. (2024). Accounting for tax uncertainty over time. SSRN. https://ssrn.com/abstract=4678373
Erickson, M., Hanlon, M., & Maydew, E. L. (2006). Is there a link between executive equity incentives and accounting fraud? Journal of Accounting Research, 44(1), 113-143.
Fakhari, M., Faghani Makrani, K., & Fazeli, N. (2023). Investigating factors influencing tax avoidance and presenting an optimal model for preventing tax avoidance. Accounting and Auditing Research Journal, 15(59), 63-86. https://doi.org/10.22034/iaar.2023.185327
Fallah, M., & Nozari, H. (2021). Quantitative analysis of cyber risks in IoT-based supply chain (FMCG industries). Journal of Decisions and Operations Research, 5(4), 510-521.
Fallah-Sogha, A., Khordyar, S., Pour-Ali, M. R., & Samadi-Largani, M. (2023). Factors affecting tax avoidance using linear regression equations. Management Accounting and Auditing Journal, 12(45), 533-544.
Goodfellow, T., & Owen, O. (2018). Taxation, property rights and the social contract in Lagos.
Haj-Sadeghi, S. (2023). The impact of changes in the profit ratio of tax subjects on tax liabilities (INTACD) with an emphasis on tax avoidance. Tax Research Journal, 2023, [page numbers if available].
Hanlon, M., Hoopes, J. L., & Shroff, N. (2014). The effect of tax authority monitoring and enforcement on financial reporting quality. Journal of American Taxation Association, 36(2), 137-170. https://doi.org/10.2139/ssrn.1691158
Hossain, M. S., Ali, M. S., Ling, C. C., & Fung, C. Y. (2024). Tax avoidance and tax evasion: Current insights and future research directions from an emerging economy. Asian Journal of Accounting Research, 9(3), 275-292. https://doi.org/10.1108/AJAR-09-2023-0305
Irani, H. R., & Nozari, H. (Eds.). (2024). Smart and Sustainable Interactive Marketing. IGI Global.
Kalogeras, S. (2021). Transmedia Storytelling Edutainment and the New Testament Lesson. In Handbook of Research on Contemporary Storytelling Methods Across New Media and Disciplines (pp. 392-406). IGI Global Scientific Publishing.
Kalogeras, S., Mejri, S., & Efthimiou, F. (2022). The neuroscience of student engagement: Case studies in narrative pedagogies in mathematics, science, and technology. International Journal of Online Pedagogy and Course Design (IJOPCD), 12(1), 1-19.
Kerr, J. N., Price, R. A., Román, F. J., & Romney, M. A. (2021). Corporate governance and tax avoidance: Evidence from governance reform. SSRN. https://ssrn.com/abstract=3861965
Khan, N., Ullah, N., Aman, N., & Sulehri, N. A. (2020). Impact of tax avoidance on firm value and the moderating role of corporate governance: Evidence from Pakistan manufacturing firms. Iqra Journal of Business and Management (IJBM), 122(2), 122–138.
Khuong, N. V., Liem, N. T., Thu, P. A., & Khanh, T. H. T. (2020). Does corporate tax avoidance explain firm performance? Evidence from an emerging economy. Cogent Business & Management, 7(1), 1780101. https://doi.org/10.1080/23311975.2020.1780101
Mahdipour, M., & Bozorgmehrian, S. (2023). The impact of International Financial Reporting Standards (IFRS) on the relationship between financial statement comparability and tax gap. Management Accounting and Auditing Journal, 14(53), 169-186.
Malik, M. S., Irfan, M., & Munir, S. (2024). Developing a sustainable finance index and its implications on inter-intra banking sector. SAGE Open, 14(3), 21582440241271232. https://doi.org/10.1177/21582440241271232
Namazi, M., & Ismailpour, H. (2020). The impact of IFRS on tax evasion and tax avoidance. Accounting Journal, 11(1), 1-33. https://sid.ir/paper/388355/fa
Okafor, S. O., Jegbefumwen, K., & Ike, A. N. (2016). Human capital investment for inclusive and sustainable economic development: The Nigerian experience. British Journal of Economics, Finance and Management Sciences, 11(1), 107-121.
Rego, S., & Wilson, R. (2012). Equity risk incentives and corporate tax aggressiveness. Journal of Accounting Research, 50, 775–809.
Riguen, R., Salhi, B., & Jarboui, A. (2020). Do women in board represent less corporate tax avoidance? A moderation analysis. International Journal of Sociology and Social Policy, 40(1/2), 114–132. https://doi.org/10.1108/IJSSP-10-2019-0211
Shaukat Malik, M., Irfan, M., & Munir, S. (2025). Corporate tax avoidance and firm performance: The moderating role of ownership concentration and board independence. Cogent Business & Management, 12(1). https://doi.org/10.1080/23311975.2024.2448277
Sheikhi, Z., Hasani, Z., Tolu'i, M., & Ghazanfari, M. (2022). The impact of changes in accounting standards on the financial position of listed companies in the stock exchange. 10th International Conference on Management, Global Trade, Economics, Finance, and Social Sciences. https://civilica.com/doc/1461482
Tayefe, S., Dastgiri, M., Rezaei, F., & Ahmadi, S. (2019). Ranking factors influencing corporate tax avoidance. Value and Behavioral Accounting Quarterly Journal, 4(7), 309-341.
Valipur, M., Akbarpour, K., Babaei-Khalili, J., & Aruzian-Rostami, A. (2014). A comparative study on the impact of fundamental differences between tax laws and accounting standards on the difference between reported and final taxable income. First National Conference on Accounting and Auditing, Bandar Gaz. https://civilica.com/doc/370429
Van Nguyen, T., & Lu, C. H. (2024). Financial intermediation in banks and the key role of intellectual capital: New analysis from an emerging market. Journal of Financial Services Marketing, 29(2), 508–522. https://doi.org/10.1057/s41264-023-00220-0
Journal of Industrial and Systems Engineering
Volume 17, Issue 1 - Serial Number 1
Winter 2025
Pages 168-181

  • Receive Date 29 January 2024
  • Revise Date 23 June 2024
  • Accept Date 19 July 2024