Income Taxes: Objective Values or Subjective Values as They Result from Financial Statements that Contain Subjective Data or Values Determined Subjectively by Financial Reporting Preparers?

Maria Silvia Avi


Research on more than 1500 Italian companies from 2016 to 2019 shows that the inclusion of tax values in financial reporting without any economic content is a widespread accounting practice. Tax interferences in financial reporting have various motivations and prove consequences both inside and outside the company. In the following pages, we will illustrate the results of the analysis carried out, the motivations leading to the incorrect accounting behaviour of the implementation of tax interferences and the consequences resulting from this widespread practice. It should be noted that tax interference causes problems both inside and outside the company. Such tax contamination of financial reporting affects the rights of third parties outside the company, and creates the conditions for challenges to financial reporting due to invalidity of the document. It also creates a basis for incorrect accounting data that can lead to wrong decisions by management.

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