The Impact of Effective Corporate Governance on the Relationship between Tax Gap and Future Profit Changes in Iranian Economy

Document Type : Research Paper


1 Department of Accounting, Ahvaz Branch, Islamic Azad University, Ahvaz, Iran

2 Department of Accounting, Faculty of Economic, Shahid Chamran University, Ahvaz, Iran

3 Department of Mathematics and Statistics, Faculty of Humanities, Abadan Branch, Islamic Azad University, Abadan, Iran



In most countries, taxation plays a very important role as one of the main means of government in the economy. Most of the state's revenue sources are taxed, through which redistribution for the three purposes of allocating economic benefits. Income and economic stability are used. Due to differences in tax laws and regulations and accepted accounting principles and principles, what may be considered from the perspective of income and expense accounting theories may not necessarily be from the perspective of income and expense tax laws. It should be noted, however, that the purpose of determining profits in the preparation of financial statements from an accounting perspective is to Determining the source of tax calculation is different in tax laws (Karbassi Yazdi and Rasekh Saleh, 2013). It accounts for a large share of Iran's GDP, so addressing it can play an important role in achieving the ultimate goals of macro policies (Khajavi et al., 2010). With the formation of agency relations, the conflict of interest between Managers, shareholders on the one hand, and other stakeholders (such as the government) on the other. Yat is not the same as determinate tax (tax gap). Two goals are conceivable. While this gap is expected to affect the quality of reported earnings for investors, the greater the difference, the lower the firm's profitability. And affect future profits of companies.


[1] Aflatooni, A., Econometrics in Financial and Accounting Research with Eviews Software, Tehran, Termeh Publishin,2018. (In Persian).
[2] Alfonso, C., Rosaria, V. P., Stefano, P., Spatial dynamic modelling of tax gap: the case of Italy, European Spatial Research and Policy, 2018, 25(1), P.7-28. Doi: 10.18778/1231-1952.25.1.02.
[3] Alley, C., Simon, J., The interface between financial accounting and tax accounting: a summary of current research, the University of Waikato, 2005, Working paper, 84,
[4] Arab Mazar, M., Taleb Nia, Q., Vakilifard, H., Samadi, M., Explaining the Relationship between Financial Reporting Transparency and Tax Reporting in Iran, Journal of Accounting Research, 2011, 90. (In Persian).
[5] Babajani, J., Abdi, M., The relationship between corporate governance and corporate income tax, Financial Accounting Research, Second Year, 2010, 8, P.25-32. (In Persian).
[6] Blaylock, B., Shelvin, T.,Wilson, R. J., Tax avoidance, large positive temporary book – tax differences, and earnings persistence, The Accounting Review, 2011, 87(1), P.91-120 ,Doi: 10.2139/ssrn.1524298.
[7] Bozorg Asl, M., Cash Profit Tax Accounting; Periodic Tax Assignments, Auditor's Journal, 1379, 8, P.49-45, (In Persian).
[8] Danquah, M., Osei-Assibey, E., The extent determinants of tax gap in the informal sector: evidence from Ghana, Journal of International Development, 2018, 30(6), P.992-1005,
[9] Davani, G, H., Collection of Direct Tax Laws, Kiomars Publications, 2015, 31st Edition, Tehran, (In Persian).
[10] Desai, M., The divergence between book income and tax income, 2002, SSRN Working Paper, Doi: 10.1086/tpe.17.20140508.
[11] Desai, M.A., Dharmapala, D., Corporate Tax Avoidance and high Powered Incentives, Journal of Financial Economics, 2006 , 79, P.145–179, Doi:10.1016/j.jfineco.2005.02.002.
 [12] Desai, M., Dharmapala, D., Earnings management, corporate tax shelters, and book-tax alignment, National tax Journal, 2009, 62(1), P.169-186, Doi: 10.2307/41790634.
[13] Didar, H., Mansourfar, G., Kafami, M., Investigating the effect of corporate governance mechanisms on tax gaps in companies listed on the Tehran Stock Exchange, Accounting and Auditing Reviews, 2014, 21(4), P.430-409, Doi: 10.22059/acctgrev.2014.52901.
[14] Didar, H., Abdi, S., and Tutunchi Asl, M, R., Impact of tax gap on asymmetric cost behavior, National Iranian Accounting Conference, University of Isfahan, Iran. 2018,16 th. Coi: IAAC16_047.
[15] Edwards, A., Schwab, C., Shevlin, T., Financial constraints and cash tax savings, The Accounting Review, 2016, 91(3), P.859-881, Doi: 10.2308/accr-51282.
[16] Guenther, D. S., Matsunaga, R., Williams, B. M., Tax avoidance, tax aggressiveness, tax risk and firm risk, working paper university of Oregon, Department of Accounting, 2014, Doi: 10.2139/ssrn.2153187.
[17] Hanlon, M., Shevlin, T., Book-Tax Conformity for Corporate Income: An Introduction to the issues, Tax Policy and the Economy, 2005, 19, P.101-134, Doi:10.1086/tpe.19.20061897.
[18] Hanlon, M., The persistence and pricing of earnings, accruals, and cash flows when firms have large book-tax differences, The Accounting Review, 2005, 80(1), P.137-166, Doi: 10.2307/4093164.
[19] Hendrickson, A., Vancouver, M., Accounting Theory, translated by Dr. Ali Parsaiyan, third edition: 2009, Tehran, Termeh Publications, (In Persian).
[20] Izadikhah, M., Saen, R.F., Roostaee, R., How to assess sustainability of suppliers in the presence of volume discount and negative data in data envelopment analysis? Annals of Operations Research, 2018, 269, P.241-267, Doi:10.1007/s10479-018-2790-6
[21] Izadikhah, M., Improving the Banks Shareholder Long Term Values by Using Data Envelopment Analysis Model, Advances in Mathematical Finance and Applications, 2018, 3(2), P.27-41.
 Doi: 10.22034/amfa.2018.540829
[22] Jackson, M., Book-Tax Differences and Future Earnings Changes, 2015, Doi: 10.2308/atax-51164.
[23] Jackson, M., Book-Tax Differences and Earnings Growth , Ph. D. theses, University of Oregon Dept of Accounting, 2010, Doi: 10.2139/ssrn.1410790.
[24] Karbasi Yazdi, H., Rasekh Saleh, S., The Relationship between Accounting Profit and Profit Based on Tax Calculation with Profit Growth and Sustainability, Financial and Auditing Accounting Research, 2013, 5(4), P.236-203, (In Persian).
[25] Khani, A., Imani, K., Yousefi, A., Tax avoidance, how to measure and the factors affecting it, Accounting Research, 2014, 4(3), P.142-121, Doi:10.22051/IJAR.2015.2013 (In Persian).
[26] Manzon, G., Plesko, A., The relation between financial and tax reporting measures of income, The Law Review, 2002, 55, P.175-214, Doi:10.2139/ssrn.264112.
[27] Modarres, A., Zareian Borji, H., Investigating the information content of the difference between the expressed and definite tax and its relationship with the profit quality of companies, Management Accounting, 2013, 6(17), P.28-15, (In Persian).
[28] Rahmani, A., Arbabi Bahar, Z., Relationship between the difference between diagnostic taxation and profit management, Experimental Accounting Research, 2014, 3(4), P.83-61, (In Persian).
[29] Samati, M., Khandani, H.,Estimating the share of tax breaks and tax evasion in creating tax gaps, Quarterly Journal of Economic Research and Policy, 2017, 25(84), (In Persian).
[30] Satori, N., Effects of strategic tax behaviors on corporate governance, university of Michigan, September 2008. Doi:10.2139/ssrn.1358930.
[31] Kwon, S.Y., Lee, N. R., Ki E., Effects of agency costs on the relationship of corporate governance with audit quality and accounting conservatism in the Korean audit market, Asia-Pacific Journal of Accounting and Economics, 2014, 21(2), P.157-185, Doi:10.1080/16081625.2012.762970.
[32] Wildasin, D., Communications, R. M., Haig: pioneer advocate of expenditure taxation? Journal of Economic Literature, 1990, 28(2), P.649-660, Doi: 10.2307/2727267.
Volume 7, Issue 2
April 2022
Pages 345-359
  • Receive Date: 11 March 2020
  • Revise Date: 10 June 2020
  • Accept Date: 10 June 2020
  • First Publish Date: 05 January 2021