Effective Tax Rate- a Comparison of Ifrs and Us-Gaap
Academic Research Expose
Effective Tax Rate[1]– A Comparison between IFRS[2] and US-GAAP[3]
Identification of the Subject The topic I have chosen refers to the relative effective taxes on profits from concerns. To calculate the effective tax rate, divide the total tax liability divided in current and deferred taxes by the total taxable plus non-taxable income and multiply it with 100 to get a percentage[4].
MotivationThe main focus of my studies is on accounting, finance and taxation. Nowadays, the ETR moved in the spotlight of attention and is a decisive index for the investment decisions of analysts and investors. Consider the following to make it more comprehensible: the lower the ETR, the better the tax performance of a company and the better the investments of investors. As consequence there is more capital available. But the ETR can be manipulated through the differences between the accounting standards IFRS and US-GAAP[5], thus a comparison, not only of the ETR but also of the tax policy becomes very complicated which leads to the research question.Research Question and Main HypothesisWhat differences exist between the standards? How is manipulation done and what impact does this have on investors? Shareholders and investors prefer a low ETR. Accordingly the tax department should decrease the ETR, which provokes potential manipulation[6]. The result will be an efficient tax performance, that will cause a high profitability.
Rationale and Literature
A lot of research has already been done on the ETR and moreover on the comparison of the standards so far. Researcher found out that deferred taxes[7] play a crucial role in the calculation of the ETR. If they are not regarded, the result of the ETR appears without any significance for a comparison. Additionally many other factors should be taken in account, which are essential not only for the calculation but also for the comparison of the ETR. For example the ETR's reference on the index “earnings per
Effective Tax Rate[1]– A Comparison between IFRS[2] and US-GAAP[3]
Identification of the Subject The topic I have chosen refers to the relative effective taxes on profits from concerns. To calculate the effective tax rate, divide the total tax liability divided in current and deferred taxes by the total taxable plus non-taxable income and multiply it with 100 to get a percentage[4].
MotivationThe main focus of my studies is on accounting, finance and taxation. Nowadays, the ETR moved in the spotlight of attention and is a decisive index for the investment decisions of analysts and investors. Consider the following to make it more comprehensible: the lower the ETR, the better the tax performance of a company and the better the investments of investors. As consequence there is more capital available. But the ETR can be manipulated through the differences between the accounting standards IFRS and US-GAAP[5], thus a comparison, not only of the ETR but also of the tax policy becomes very complicated which leads to the research question.Research Question and Main HypothesisWhat differences exist between the standards? How is manipulation done and what impact does this have on investors? Shareholders and investors prefer a low ETR. Accordingly the tax department should decrease the ETR, which provokes potential manipulation[6]. The result will be an efficient tax performance, that will cause a high profitability.
Rationale and Literature
A lot of research has already been done on the ETR and moreover on the comparison of the standards so far. Researcher found out that deferred taxes[7] play a crucial role in the calculation of the ETR. If they are not regarded, the result of the ETR appears without any significance for a comparison. Additionally many other factors should be taken in account, which are essential not only for the calculation but also for the comparison of the ETR. For example the ETR's reference on the index “earnings per