Book-tax conformity and the demand for auditor-provided tax services: European evidence

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Sun, Xuan Sean
Habib, Ahsan
Yao, Daifei Troy
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Purpose: This study aims to examine the impact of different levels of required book-tax conformity (BTC) on audit clients' demand for auditor-provided tax services (APTS). In addition, the authors also investigate the effects of the European Union (EU) Regulation (2014). Design/methodology/approach: This study utilizes a sample of listed companies from 10 EU countries between 2010 and 2019. The final sample consists of 16,049 firm-year observations from 2,515 unique firms, and the authors use both probit and ordinary least square (OLS) regression models in this study. Findings: The main finding of this paper is that companies listed in countries with a higher level of BTC are less likely to purchase tax services from incumbent auditors and pay fewer auditor-provided tax service fees. Results from further analyses confirm that firms substantially reduced their purchase of APTS after the EU Regulation (2014) was implemented, but these reduced purchases were found to be more pronounced for firms located in countries with low BTC. Originality/value: This study advances the understanding of the determinants of APTS and the consequences of BTC. Specifically, the authors report that variation in a country-specific feature (i.e. BTC) also affects firms' decision to purchase APTS. Moreover, this paper provides some preliminary evidence of the new regulation and contributes to the literature on APTS regulation. The findings of this study have important policy implications for regulators and are also relevant for various capital market participants.

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Journal of Accounting Literature
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© Emerald Publishing Limited. This author accepted manuscript is deposited under a Creative Commons Attribution Non-commercial 4.0 International (CC BY-NC) licence. This means that anyone may distribute, adapt, and build upon the work for non-commercial purposes, subject to full attribution. If you wish to use this manuscript for commercial purposes, please contact
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Related item(s)
Public economics - taxation and revenue
Accounting, auditing and accountability
Banking, finance and investment
Social Sciences
Business, Finance
Business & Economics
Auditor-provided tax services
Book-tax conformity
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Sun, XS; Habib, A; Yao, DT, Book-tax conformity and the demand for auditor-provided tax services: European evidence, Journal of Accounting Literature, 2023