This study aims to investigate the impact of mandatory adoption of International Financial Reporting Standard (IFRS) 15 “Revenue from contracts with customers” on corporate tax avoidance.
The analysis is based on a sample of non-financial firms listed on the STOXX Europe 600 index over the period 2012–2023. The regression model is estimated using feasible generalized least squares to address potential heteroscedasticity and autocorrelation issues. Tax avoidance is using three proxies: the difference between the statutory tax rate and the effective tax rate, the cash effective tax rate and the book-tax differences.
The results indicate that European listed companies experienced a decline in tax avoidance following the adoption of IFRS 15. Additional analyses confirm our main findings for permanent book-tax differences and reveal a complementary relationship between IFRS 15 adoption and the strength of investor protection in mitigating tax avoidance practices.
The findings suggest that accounting standards aimed at improving financial reporting quality, such as IFRS 15, can also have unintended benefits in curbing tax avoidance. Policymakers and standard-setters should consider the interplay between financial reporting regulations and tax avoidance incentives when designing future standards. Furthermore, strong country-level institutional frameworks can amplify these positive effects and support broader objectives of corporate transparency and tax compliance.
This study contributes to the literature by providing novel evidence on the tax-related consequences of IFRS 15 adoption in Europe. It highlights the standard’s indirect role in reducing corporate tax avoidance and complements prior research on IFRS 15’s economic effects. In addition, the study offers insights into the interaction between IFRS adoption and country-level institutional factors in shaping corporate tax behavior.
