Abstract

This paper analyses the following 5 tax avoidance measures using book－tax differences(BTD) calculated by two dimensions. The one is classified by tax avoidance model, and the measures are total BTD, abnormal BTD of Desai and Dharmapala(2006) model, and abnormal BTD of Park(2014)’s extended model. The other is classified by taxable income estimation and the measures are total and abnormal BTD using traditional estimated taxable income or approximate real taxable income. Park(2014)’s extended model has additional independent variable of taxes currently payable besides total accruals. Traditional estimated taxable income is calculated from taxes currently payable, whereas approximate real taxable income is from taxes currently payable adding tax exemptions and tax credits. The sample consists of 800 listed manufacturing firms in KIS－Value with the data for 2011－2014 years and the final sample observations are 3,199 firm－years after excluding 1 outlier sample. The empirical results of mean and median difference tests reject the null hypothesis that the tax avoidance measures have no differences in their statistical characteristics. Especially, Desai and Dharmapala(2006) model shows significantly low coefficient of determination relative to Park(2014)’s extended model. Furthermore, the tax avoidance measure using traditional estimated taxable income will have possibility of significant error in case of the presence of tax exemptions and tax credits. So, it’s recommended to use taxes currently payable reflecting tax exemptions and tax credits for taxable income estimation and to use Park(2014)’s extended model for tax avoidance calculation.

Keywords

• Tax Avoidance
• Book－Tax Differences
• Total Accruals
• Taxes Currently Payable
• Estimated Taxable Income

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