Is SMEs accounting influenced by taxation? Some empirical evidence from Romania

Abstract

One specific aspect of small and medium-sized entities (SMEs) accounting debated in literature is its connection with taxation. This ‘connection’ is not always explicitly recognized, since accounting rules are separate from fiscal ones. In practice however, these seem to interweave, as accountants usually turn also to fiscal regulations when treating transactions, providing more of a fiscal than accounting ‘true and fair view’ of the position of the entity (especially for the small and medium-sized entities). We performed an empirical analysis over a period of 11 years seeking evidence on the de facto relationship between accounting and taxation. We collected data from the Romanian SMEs sector, since in our country changes in accounting and fiscal regulations provide an excellent setting for analyzing such a relationship, as explained in the paper. Our empirical findings confirm that accounting is indeed influenced by taxation (de facto influence); however, the level of such influence varies across the years under observation. Furthermore, amendments in the tax and accounting regulations seem to contribute to the disconnection of taxation from accounting, but with a low force. Key words: SMEs, accounting, taxation, Romania.

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