Does IFRS information on tax loss carryforwards and negative performance improve predictions of earnings and cash flows?

Unlabelled: We analyze the usefulness of accounting information on tax loss carryforwards and negative performance to predict earnings and cash flows. We use hand-collected information on tax loss carryforwards and corresponding deferred taxes from the International Financial Reporting Standards tax footnotes for listed firms from Germany. Our out-of-sample tests show that considering accounting information on tax loss carryforwards does not enhance performance forecasts and typically even worsens predictions.

[Tax Policy in the COVID-19 Crisis].

Current reform proposals call for a reduction of the corporate tax burden in Germany and justify this due to the competitiveness of Germany as a business location. However, in view of Germany's continuously high attractiveness in this regard, these demands appear to be inappropriate, even in an international context. To ensure this attractiveness in the long term, it seems to be more important to focus on investments in digitisation, the digital infrastructure, and electromobility.