Identifying the Effective Components in Validating the Declared Taxable Income of Companies: Using the Structural Equation Model

In recent years, the country’s tax administration has adopted an approach emphasizing trust in taxpayers and the assumption of the accuracy of the information they provide. Consequently, it has reviewed and enhanced its systems and directives. This paper presents a comprehensive model for validating companies’ taxable income through the lenses of trust theory, information validity theory, the law of truthfulness, and theories of truth, including correspondence, coherence, and pragmatism. By conducting semi-structured interviews with experts in 2021 and 2022, the components and indicators influencing the declared taxable income of companies were identified. Using the structural equation modeling method, a proposed research model was developed. In order of importance, the factors affecting the credibility of the taxable income declared by companies are auditing, technical, systemic, environmental, company-specific, and financial and accounting factors. The tax administration should consider these factors when assessing income credibility, and companies subject to taxation should give appropriate attention to them. The components identified in this research can assist in determining the validity of declared taxable income and assessing companies’ credit risk. Additionally, this framework provides a solid foundation for selecting taxpayers for audits before initiating the tax audit process. Furthermore, the research findings contribute to developing theoretical support in accounting and tax research.