Tax Planning And Earnings Management

"Only death and paying taxes can't escape." It has been famous in Britain and the United States for a long time.The fundamental starting point of tax planning is based on the reasonable direction of tax policies and regulations, through the effective allocation of capital and resources, access to the best ratio of income and tax burden, thus maximizing the tax benefits. Tax planning is the specific product of the economic and social development on a certain stage. At the same time, its depth development promotes the economic and social development in modern economic life and has far-reaching significance.Since Modigliani & Miller (1963) took into account the impact of tax and amended the MM theory, which was created in 1958 by them, then created the new MM theory, the research in the impaction of corporate income tax on company's capital structure, dividend distribution, and other aspects of financial policy choices in West has been more perfect. However, there have been some literatures in which tax impacts on accounting policy choices in recent years, the research is on a more fragmented way. Nearly no study has analyzed the topic of the tax planning under the influence of new accounting and tax system, and in this context the relations of tax planning and earnings management.With China's accounting standards reform pushing forward steadily, enterprises have had more choices of accounting policies and accounting estimates,the space of autonomy of earnings management is increasing gradually. Although there have been sporadic introductions about this topic in recent years, but little systematic and in-depth study. At the same time, the discussion of tax planning just remains in qualitative comparison between the terms of two systems, few literature conducted quantitative study on it, and almost nobody did empirical study about the behaviors and their relations of tax planning and earnings management and so on.I chose Book-tax difference as the starting point, use the combined method of theoretical and empirical research, trying to explore in depth the new accounting standards in the context of corporate tax planning, the relationship with earnings management, and enlightenment on disclosure of accounting information. On the one hand, this paper strives to achieve a breakthrough research in the theory, the methods and systematic analysis of China's problems, both to make up for the field of theoretical research at home and abroad. At the same time, to introduce readers to the field of Western literature research. I believe that this paper will have a theoretical value and practical significance to some extent.This paper is discussed mainly in seven aspects as follows: (1) Introduction; (2) The related theoretical basis; (3) The fundamental question of tax planning and earnings management analysis; (4) The New accounting standards and their impact on tax planning;(5) Empirical analysis of tax planning and earnings management; (6) The revelation of tax Planning for the disclosure of accounting information; (7) Research findings, policy recommendations and research prospects.1. Introduction. This chapter introduces the research background and the meaning of the relevant literature which is reviewed at home and abroad, introduced the paper structure, research ideas and methods, and summarizes the thesis and the lack of innovation.2. The related theoretical basis. This chapter is mainly talked about the related theories, which make up the basis of this paper. The major theories are: the economy's limited rationality, incomplete information, the opportunistic behavior of enterprises, the effectiveness of the capital market, the game theory and the contract theory. At the same time, the basic principles of tax planning are analyzed. Through analysis of the relevant basic theory, the chapter aims to lay a solid theoretical basis.3. The fundamental question of tax planning and earnings management analysis. Tax planning is a broader concept of connotation, and seats in the subject belonging to the scope of financial management. This article is based on tax planning with enterprises as the mainstay of their income tax, tracing the emergence and development of tax planning, and summing up the necessity and significance of the study. Pointing out the accounting profit or loss and taxable profit or loss, the differences and their mutual relations, is the prerequisite for tax planning effectively, and the link with analysis of the relationship between earnings management. By research and analysis, this chapter aims not only to clarify the connotation and extension, and the precise scope of the study, but also to support usefully on theory for the post-study of the text.4. The New accounting standards and their impact on tax planning. This chapter points out the background of the new accounting standards, their significance and main content. Then, by comparing the old with the new accounting standards, it introduces the income tax accounting standards, and analyses of the new Enterprise Income Tax Law of the development, the background, and the content. Finally, on this basis, it analyses of new accounting standards on corporate income tax and the impact of tax planning. This chapter is in order to bedding policy background to the empirical research on corporate tax planning and the relationship between earnings management behavior under the influence of the new accounting standards.5. Empirical analysis of tax planning and earnings management. The chapter is a necessary component of this paper, it is not only the implementation of the theoretical analysis and policy background in former, but also the confirmation of relationship between tax planning and the earnings management this article attempts to explore. First of all, with an introduction of this chapter, the author set out the intention to carry out empirical studies and attempt to resolve the problem, then reviewing the related literature and then conducted a study design, sample selection and descriptive statistics, and then arrive at the results of empirical analysis.6. The revelation of tax planning for the disclosure of accounting information. First of all, this chapter analyses generally the quality and the disclosure and the problems of accounting information, then analyses of the basic framework of disclosure under the new accounting standards, and the contribution of new accounting standards accounting information of listed companies to disclosure. Then, using deductive method, it analyses of the characteristics of the information disclosure of income tax accounting, the requirements of new accounting standards on accounting to disclosure, thus, further analysis of the enlightenment of income tax planning for the disclosure of accounting information. This chapter intents to reflect the application value of research of the full text.7. Research findings, policy recommendations and research prospects. This paper uses the book-tax difference between the as the contained logic starting point for the context, and studies on the association between tax planning and earnings management under the impact of new accounting standards, and receives the expected effects, then, on this basis, it analyses of the enlightenment of tax planning to the disclosure of accounting information, and discusses of the policy recommendations. Finally, the author puts forward the following prospects:(1)The use of economic theory and empirical analysis to explain the system change; (2)Comprehensive weigh the economic consequences of earnings management;(3) The intertwined relationship between the application of the principle of caution and income tax-earnings management; (4) Distinguished researches between listed companies and non-listed companies; (5) The related research with the implementation of the new tax system and the new accounting guidelines in China.