The Research On The Relation-ship Between Accounting Pirnciples And Tax Law And Regulations In China

The relationship between accounting principle and tax law is an important topic inmodern market economy. There are two major models of accounting-taxationrelationship in the world, one being the separation approaching Anglo-Saxon modelrepresented by United Kingdom and the United States; the other one being theunification approaching Continental European model represented by France andGermany.The accounting-taxation relationship is a topic in modern economy however, thebasis of accounting and taxation is ever-evolving throughout human history. TheLegislative basis, legal structure, social and economic situation of different countriesand regions evolves over time. All these factors have different impacts on theformation of modern accounting-taxation relationship system.The Continental model has advantage on preventing financial fraud and ensuringaccuracy of accounting information. Anglo-Saxon model on the other hand, is moreconducive to investment decision making and protecting the interest of small investors.The models of accounting-taxation relationship have their different applicability.Learning successful experiences of other countries is essential when reforming theaccounting-taxation relationship in China; however it is more important to fullyunderstand the situation and problems that the country is facing and plan the reformaccordingly.The relationship between accounting principle and tax law took the separationapproach of the Anglo-Saxon model since the implementation of modern accountingsystem in China. It was mainly drawn on the system of the United States. Furthermore,the degree of accounting-taxation separation is increased over time.China’s actual social and economic situation has significant differences from thatof the United States. Thus the current separation approaching accounting-taxationrelationship is not fully suitable to China’s economy. Furthermore, the over-separatedaccounting and taxation has created serious problems such as the abuse of the principle of prudence.One of the main factors that determine the adoptable model of accounting-taxation relationship is the user’s requirement of accounting information. There aretwo main target groups of accounting in China. The first group is large enterprises andlisted companies. The main user of accounting information in these firms areshareholders and potential investors who focus more on information that helps oninvestment decision making. For this group of firms, it is more efficient for theaccounting-taxation relationship to keep separated. Meanwhile, it is also important toenhance the reliability of accounting information.The second group consists of small firms and state owned enterprises. Theaccounting in these firms is mainly for taxation purpose. The main users of accountinginformation are the related government authorities who look more on informationreliability. Small firms and state owned enterprises are very large in number andcomprise the main body of China’s economy. Thus the general direction of reform ofthe relationship between accounting principle and tax law in China should take theContinental European approach.Taxation accounting system is a special branch of financial accounting systemdeveloped to fulfill the needs of modern market economy. Although taxationaccounting is developed separately from financial accounting, it still relies on financialaccounting information. Independent taxation accounting system is an important partof accounting-taxation relationship reform in China.Independent taxation accounting helps SMEs to alleviate the burden of taxaccounting and makes tax accounting more accurate and professional. To those largeand listed firms, taxation accounting service is a good measure to enhance companyefficiency. Furthermore, the establishment of professional taxation accounting bodiesis conducive for Chinese firms to go international.This thesis is based on research of current relationship between accounting andtaxation in China and analyzed the causes of existing problems. The characteristics ofdifferent accounting-taxation relationship models have been compared and analyzed todetermine the parts and measures in the models that applicable to China. Variousmeasures of accounting-taxation relationship reform are suggested in this thesis. Suchmeasures include adopting “fusion” model of the relationship, establishing separatedprofessional taxation accounting system and categorized management of taxation accounting. The focus of the suggested measures is to keep the accounting and taxationsystem flexible and forward-looking. Applicable characteristics of various systems are“fused” together to better enhance China’s economic development.