nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2005‒08‒13
thirty-two papers chosen by
Ken D'Silva
London South Bank University

  1. Effects of Tax Morale on Tax Compliance: Experimental and Survey Evidence By Ronald G. Cummings; Jorge Martinez-Vazquez; Michael McKee; Benno Torgler
  2. Fiscal Gimmickry in Europe: One-Off Measures and Creative Accounting By Vincent Koen; Paul Van den Noord
  3. The Changing Role of Auditors in Corporate Tax Planning By Edward L. Maydew; Douglas A. Shackelford
  4. Corporate Governance as an instrument of change state owned Corporate Governance as an instrument of change state owned companies: The case of the Hellenic Telecommunications Organization By Loukas Spanos; Demetrios Papoulias
  5. Towards Community Ownership of the Tax System: The taxation Ombudsman’s perspective By Philip Moss
  6. Perceptions of Tax Evasion as a Crime By Stewart Karlinsky, Hughlene Burton†, Cindy Blanthorne
  7. Effects of Corporate Tax Reforms on SMEs´ Investment Decisions under the Particular Consideration of Inflation By Chang Woon Nam; Doina Maria Radulescu
  8. (Why) Do we need Corporate Taxation? By Alfons Weichenrieder
  9. Les leviers de contrôle des actionnaires majoritaires By Thibault Biebuyck; Ariane Chapelle; Ariane Szafarz
  10. Tax Knowledge for Undergraduate Accounting Majors: Conceptual v. Technical By Lin Mei Tan and John Veal
  11. Institutional Investor Activism: Does the Portfolio Management Skill Matter? By Carlos F. alves; Victor Mendes
  12. Why Do People Pay Taxes? Prospect Theory Versus Expected Utility Theory By Sanjit Dhami; Ali al-Nowaihi
  13. Tax Reform in the China Context: The corporate tax unit & Chinese enterprise By Nolan Sharkey
  14. The Start-Up and Growth Stages in Enterprise Formation: The New View of Dividend Taxation Reconsidered By Vesa Kanniainen; Seppo Kari; Jouko Ylä-Liedenpohja
  15. Strategic Tax Competition in Switzerland: Evidence from a Panel of the Swiss Cantons By Lars P. Feld; Emmanuelle Reulier
  16. Controlling Firms through the Majority Voting Rule By Ariane Chapelle; Ariane Szafarz
  17. Tax Treatment of Private Pension Savings in OECD Countries and the Net Tax Cost Per Unit of Contribution to Tax-Favoured Schemes By Alain De Serres; Kwang-Yeol Yoo
  18. GST and the Changing Incidence of Australian Taxes: 1994-95 to 2001-02 By Neil Warren, Ann Harding and Rachel Lloyd
  19. Does Germany Collect Revenue from Taxing Capital Income? By Johannes Becker; Clemens Fuest
  20. A Growth Oriented Dual Income Tax By Christian Keuschnigg; Martin D. Dietz
  21. Institutions, Corruption and Tax Evasion in the Unofficial Economy By Douglas Hibbs; Violeta Piculescu
  22. Joint ventures, pollution abd environmental policy By Indrani Roy Chowdhury
  23. Competency of Malaysian Salaried Individuals in Relation to Tax Compliance under Self Assessment By Ern Chen Loo and Juan Keng Ho
  24. Globalisation, Innovation and Information Sharing in Tax Systems: The Australian experience of the diffusion and adoption of electronic lodgement By Liane Turner and Christina Apelt
  25. Trusts and Double Taxation Agreements By John Prebble
  26. Benefit Coverage Rates and Household Typologies: Scope and Limitations of Tax-Benefit Indicators By Herwig Immervoll; Pascal Marianna; Marco Mira D’Ercole
  27. Comparatif des finances cantonales et communales / Comparison of Cantonal and Municipal Finances By Nils Soguel; Simon Iogna-Prat; Toni Beutler
  28. Race to the Top or Bottom? Corporate Governance, Freedom of Reincorporation and Competition in Law By Fluck, Zsuzsanna; Mayer, Colin
  30. Socially-Improving Tax Reforms By Paul Makdissi; Jean-Yves Duclos
  31. A Fiscal Rule that has Teeth: A Suggestion for a Fiscal Sustainability Council underpinned by the Financial Markets By Petr Hedbávný; Ondrej Schneider; Jan Zápal
  32. The Effect of the Human Rights Act 1998 on Taxation Policy and Administration By Natalie Lee

  1. By: Ronald G. Cummings (Andrew Young School of Policy Studies); Jorge Martinez-Vazquez (Andrew Young School of Policy Studies); Michael McKee; Benno Torgler (World Bank)
    Abstract: There is considerable evidence that enforcement efforts can increase tax compliance. However, there must be other forces at work because observed compliance levels cannot be fully explained by the level of enforcement actions typical of most tax authorities. Further, there are observed differences, not related to enforcement effort, in the levels of compliance across countries and cultures. To fully understand differences in compliance behavior across cultures one needs to understand differences in tax administration and citizen attitudes toward governments. The working hypothesis is that cross-cultural differences in behavior have foundations in these institutions. Tax compliance is a complex behavioral issue and its investigation requires the use of a variety of methods and data sources. Results from laboratory experiments conducted in different countries demonstrate that observed differences in tax compliance levels can be explained by differences in the fairness of tax administration, in the perceived fiscal exchange, and in the overall attitude towards the respective governments. These experimental results are shown to be robust by replicating them for the same countries using survey response measures of “tax morale.”
    Keywords: Behavior, tax morale, tax compliance
    Date: 2005–07–01
  2. By: Vincent Koen; Paul Van den Noord
    Abstract: <P>Accounting conventions usually leave some room for judgment, which governments may be tempted to take advantage of, especially when fiscal rules bite or threaten to do so. The European experience over the past decade -- documented here in great detail -- illustrates that fiscal gimmicks come in many different guises, but also that some are less mischievous than others. Logit regression analysis confirms that when deficit rules or, to a lesser extent, debt thresholds tend to become more binding, recourse to gimmicks is more likely. It also suggests that more centralised budget systems are less prone to such gimmickry. The policy implications are clear as regards the virtues of transparent and consistent accounting practices, but more ambiguous regarding the merits or otherwise of one-off measures ...</P> <P>Astuces budgétaires en Europe : mesures non récurrentes et créativité comptable <P>En général, les conventions comptables sont sujettes à interprétation, et les gouvernements peuvent être tentés d’en profiter, notamment lorsqu’ils sont contraints, ou en voie de l’être, par des règles budgétaires. L’expérience européenne au cours de la décennie écoulée -- décrite ici avec force détails -- montre que les astuces budgétaires sont protéiformes, mais aussi que certaines posent moins de problèmes que d’autres. Des régressions logit confirment que lorsque les règles sur les déficits ou, dans une moindre mesure, les seuils d’endettement deviennent plus contraignants, la probabilité d’un recours à des astuces augmente. Elles corroborent également l’idée que les astuces tendent à être moins employées dans des systèmes budgétaires plus centralisés. Les implications de politique économique sont claires s’agissant des vertus de la transparence et de la cohérence des comptes, mais plus ambiguës concernant les mérites ou inconvénients des mesures non récurrentes ...</P>
    Keywords: Public debt, Dette publique, règles budgétaires, Economic and Monetary Union, Union Économique et Monétaire, Stability and Growth Pact, Pacte de stabilité et de croissance, Budgets, fiscal deficit, fiscal rules, fiscal gimmicks, national accounts, political economy, Budgets, déficit budgétaire, astuces budgétaires, comptes nationaux, économie politique
    JEL: D78 E61 H27 H6 H74 H81 H82 H87
    Date: 2005–02–10
  3. By: Edward L. Maydew; Douglas A. Shackelford
    Abstract: This paper examines changes in the role that auditors play in corporate tax planning following recent events, including the well-known accounting scandals, passage of the Sarbanes-Oxley Act, and regulatory actions by the SEC and PCAOB. On the whole, these events have increased the sensitivity to and scrutiny of auditor independence. We examine the effects of these events on the market for tax planning, in particular the longstanding link between audit and tax services. While the effects are recent, they are already being seen in the data. Specifically, there has already been a dramatic shift in the market for tax planning away from obtaining tax planning services from one's auditor. We estimate that the ratio of tax fees to audit fees paid to the auditors of firms in the S&P 500 decline from approximately one in 2001 to one-fourth in 2004. At the same time, we find no evidence of a general decline in spending for tax services. In sum, the evidence indicates a decoupling of the longstanding link between audit and tax services, such that firms are shifting their purchase of tax services away from their auditor and towards other providers.
    JEL: H2 M4 L1 L5
    Date: 2005–08
  4. By: Loukas Spanos (National & Kapodistrian University of Athens Dept. of Economics); Demetrios Papoulias (National & Kapodistrian University of Athens Dept. of Economics)
    Abstract: This paper analyses the evolution of Corporate Governance (CG) mechanisms and organizational changes of the Hellenic Telecommunication Organization (HTO) and has two objectives: to enrich the debate and to contribute to the increasing body of literature by examining and analyzing the organizational and institutional changes taken place in the HTO; and to place the HTO’s case within the international debate regarding the privatization of state-owned companies and the importance of CG mechanisms as instruments of change. It is argued that the privatization of state-owned companies, when is accompanied with appropriate reform measures, can produce multiple positive effects. CG reforms were the main instruments that used in order to prepare the telecommunications incumbent to face the open and competitive markets.
    Keywords: Corporate Governance Hellenic Telecommunications Organization (HTO), state-owned companies, privatization, change
    JEL: G32 G34 G38 L22 L96
    Date: 2005–08–02
  5. By: Philip Moss
    Abstract: Philip Moss reviews the various “controls” over the exercise of his powers of administration by the Commissioner of Taxation in Australia. He considers the terms of the legislation under which the Commissioner operates, the reporting requirements and the compliance with audit guidelines that affect the Commissioner. He describes the various Parliamentary committees that scrutinise tax administration and comments on them. He does the same for the Board of Taxation and the Treasury. The roles Administrative Appeals Tribunal and of the courts are also considered. More importantly, the author considers the purpose and powers of the Inspector General of Taxation, and the Special Tax Adviser to the Commonwealth Ombudsman. These two roles appear to overlap and even compete but, as the paper shows, they are complementary. The latter is concerned with individual taxpayers’ circumstances whereas the former has a wider, more general policy ambit and is concerned with tax administration generally.
    Keywords: Taxation, Tax Administration, Australia, power, tax system
    Date: 2005–04–22
  6. By: Stewart Karlinsky, Hughlene Burton†, Cindy Blanthorne
    Abstract: This paper considers on aspect of the deficit faced by the U. S. economy. It considers the contribution to this deficit made by the taxpayers that do not fully report taxable income and/or do not pay taxes on their income. The gap between what is owed in tax and the amount of tax actually paid is estimated at $310 billion. What portion can be attributed to underreporting and non filing? The study reported in this paper attempted to measure the perceptions of US citizens as to the seriousness of tax evasions relative to other crimes and violations. The results show that tax evasion ranked 11th among the twenty-one offences surveyed. This means that the average person views tax evasion as only somewhat serious. Compared to other white collar crimes it ranked below accounting fraud, violation of child labour laws and insider trading, and equal to welfare fraud and higher than violation of minimum wage laws.
    Keywords: Tax evasion, crime, perceptions, U.S.
    Date: 2005–04–22
  7. By: Chang Woon Nam; Doina Maria Radulescu
    Abstract: Corporate tax reforms carried out in EU countries since 1980 entail lower statutory tax rates and reductions in generous tax depreciation provisions. Several countries including the UK have reduced tax rates for SMEs. This study compares incentive effects of such reforms on the SMEs’ investment decisions adopting simple present value model. Ceteris paribus tax rate and depreciation rule vary in the model simulation, while the application of historical cost accounting method in inflationary phases leads to fictitious increases in nominal net present value. Apart from the construction of international ranking, country- specific patterns of reform effects are also illustrated.
    Keywords: SMEs, corporate tax reform, investment decision, inflation, EU countries
    JEL: H25 H32
    Date: 2005
  8. By: Alfons Weichenrieder
    Abstract: Tax rates on corporate income have considerably come down in the process of tax competition and further pressures are evident. Against this background, the paper discusses possible benefits of corporate income taxation that may be at risk. In particular, the paper surveys the empirical evidence for a backstop function of the corporate income tax that allows preserving individual taxes.
    Keywords: tax competition, corporate taxation
    JEL: H25
    Date: 2005
  9. By: Thibault Biebuyck; Ariane Chapelle (Centre Emile Bernheim, Université libre de Bruxelles, Brussels); Ariane Szafarz (Centre Emile Bernheim and DULBEA, Université libre de Bruxelles, Brussels)
    Abstract: La littérature académique en gouvernance d'entreprise étudie en particulier la séparation entre propriété et contrôle au sein de l'actionnariat des entreprises privées. Après avoir présenté les résultats relatifs aux bénéfices privés de contrôle et leur impact potentiel sur les marchés financiers, cet article détaille et illustre les mécanismes par lesquels les actionnaires dominants peuvent accroître le contrôle d'une entreprise : structures pyramidales, participations croisées, actions à droits de vote multiples, etc. La quantification du niveau de contrôle au sein d'un empire industriel peut être obtenue à l'aide de diverses méthodes. Les développements récents en la matière sont résumés et l'application à des cas internationaux réels est discutée.
    Keywords: Pyramidal Ownership; Corporate Control; Corporate Governance. Propriété et contrôle, pyramides, Gouvernance d'entreprises
    JEL: G32
    Date: 2005–02
  10. By: Lin Mei Tan and John Veal
    Abstract: With the call in recent years for a change in accounting education to redirect the focus from being too technically oriented to more conceptually oriented and more skills based, this study examined the content coverage of first tax courses in New Zealand. The survey results show that both educators and practitioners considered a higher level of conceptual understanding than technical proficiency is required in most taxation topics canvassed. A wide range of topics was covered but not to the extent that tax educators would like or the practitioners expected them to.
    Keywords: New Zealand, accountancy, education
    Date: 2005–06–29
  11. By: Carlos F. alves (CEMPRE, Faculdade de Economia, Universidade do Porto); Victor Mendes (CMVM – Comissão do Mercado de Valores Mobiliários)
    Abstract: Institutional investors are often seen as potential solutions for corporate governance problems and are requested to have a more active role in the monitoring and control of listed companies. In this paper we develop a model that, within a universal banking framework, allows one to conclude that, the greater the capacity of a financial group to generate capital inflows that react to the performance of mutual funds, the more the said attitude is likely to succeed. The paper also concludes that the efforts of supervisory authorities should be directed in particular to the relations between universal financial groups and companies in which these financial groups do not have a relevant stake.
    Keywords: Corporate Governance, Institutional Investor Activism, Universal Banking
    JEL: G10 G21 G28 G30 L20
    Date: 2005–07
  12. By: Sanjit Dhami; Ali al-Nowaihi
    Abstract: Given actual probabilities of audit and penalty rates observed in the real world, tax evasion should be an extremely attractive gamble to an expected utility maximizer. However, in practice, one observes too much compliance relative to the predictions of expected utility. This paper considers an alternative theoretical model that is based on Kahneman and Tversky’s cumulative prospect theory. The model predicts empirically plausible magnitudes of tax evasion despite low audit probabilities and penalty rates. An increase in the tax rate leads to an increase in the amount evaded- a result, which is in broad agreement with the evidence, but is contrary to the prediction made by expected utility theory. Furthermore, we show that the optimal tax rates predicted by prospect theory, in the presence of tax evasion behaviour, are consistent with actual tax rates.
    Keywords: Reference Dependence; Loss Aversion; Decision Weights; Prospect Theory; Expected Utility Theory; Tax Evasion; Optimal taxation
    JEL: D81 H26 K42
    Date: 2005–08
  13. By: Nolan Sharkey
    Abstract: Research into the relationships between people and organizations that drive social behaviour and institutions in China has produced some profound findings on the structure of society in China. The network structure of private enterprise and the importance of Guanxi are often highlighted. While some scholars of comparative law have investigated the implications these issues have for legal reform/ development in China, too many projects assume that emulation of the laws in developed legal systems is the way forward for China. This ignores the importance of tailoring China’s laws to the structure of Chinese society. The debate surrounding the reform of income tax laws in China is no exception with many commentators looking to Western tax laws to solve such severe problems as tax avoidance and low revenue yields. This paper seeks to address some of the issues that arise in applying income tax laws based on those of developed countries to private enterprise in China with a particular focus on the legal design of the income tax unit.
    Keywords: China, tax reform, income tax
    Date: 2005–04–22
  14. By: Vesa Kanniainen; Seppo Kari; Jouko Ylä-Liedenpohja
    Abstract: Early-stage uncertainty makes the initial cost of capital greater than the expansion-stage one. Tax effects on enterprise formation, entrepreneurial effort and quality, and on capital costs are derived. For an incorporated enterprise (i) the entrepreneur’s ability threshold rises with the tax rate of the corporate form, (ii) the initial cost of capital due to a dividend tax is above the old view double-tax one, (iii) the start-up investment is not affected by undervaluation, but the discouragement engendered by dividend taxation is compensated by realization-based capital gains tax, (iv) with undervaluation, the expansion-stage cost of capital corresponds to the Johansson-Samuelson tax which is lower than the new view suggests, (v) without undervaluation, the dividend tax boosts expansion investment.
    Keywords: taxation of start-up enterprises
    JEL: H25
    Date: 2005
  15. By: Lars P. Feld; Emmanuelle Reulier
    Abstract: Tax competition is discussed as a source of inefficiency in international taxation and in fiscal federalism. Two preconditions for the existence of such effects of tax competition are that mobile fac-tors locate or reside in jurisdictions with – ceteris paribus – lower tax rates and that taxes are actually set strategically in order to attract mobile production factors. It is well known from studies about Swiss cantonal and local income tax competition that Swiss taxpayers reside where income taxes are low. In this paper, empirical results on strategic tax setting by cantonal governments are presented for a panel of the Swiss cantons from 1984 to 1999. Completing the evidence on Swiss tax competition, the income tax rates in cantons are the lower, the lower are the tax rates of their neighbors.
    Keywords: Tax competition; strategic tax setting; personal income taxes
    JEL: H71 H73 H24
    Date: 2005–04
  16. By: Ariane Chapelle (Centre Emile Bernheim, Université libre de Bruxelles, Brussels); Ariane Szafarz (Centre Emile Bernheim and DULBEA, Université libre de Bruxelles, Brussels)
    Abstract: Pyramids, cross-ownership, rings, and other complex features inducing control tunnelling are frequent in the European and Asian industrial world. Based on the matrix methodology, this paper offers a model for measuring integrated ownership and threshold-based control, applicable to any group of interrelated firms. In line with the theory on pyramidal control, the model avoids the double counting problem and sets the full-control threshold at the conservative - but incontestable - majority level of 50% of the voting shares. Any lower threshold leads to potential inconsistencies and leaves unexplained the observed high level of ownership of many dominant shareholders. Furthermore, the models leads to ultimate shareholders' control ratios consistent with the majority voting rule. Finally, it is applied to the Frère Group, a large European pyramidal holding company known for mastering control leverages.
    Keywords: Majority Voting Rule, Pyramidal Ownership, Corporate Control, Corporate Governance
    JEL: G32
    Date: 2005–02
  17. By: Alain De Serres; Kwang-Yeol Yoo
    Abstract: <P>This paper provides, for all OECD countries, an estimate of the net tax cost per currency unit of contribution to a tax-favoured retirement savings plan, using a present-value methodology. The latter takes into account the future flows of revenues foregone on accrued income and of revenues collected on benefit withdrawals corresponding to a unit contribution made in a given year. The net tax cost is first calculated for nine (five-year) age groups, which have different relative income levels and investment time horizons, and is then averaged across age groups. In order to take into consideration the relevant country-specific features of savings taxation, the paper also provides an overview of the tax treatment of private pension arrangements and alternative savings vehicles. The results indicate that the size of tax subsidy varies significantly across countries, ranging from nearly 40 cents per unit of contribution (Czech Republic) to around zero (Mexico, New Zealand). Over half of ...</P> <P>Traitement fiscal des pensions privées dans les pays de l’OCDE et le coût fiscal net par unité de contribution à un plan d’épargne retraite <P>Cette étude présente pour l’ensemble des pays de l’OCDE, une estimation du coût fiscal net (<I>e.g.</I> dollar ou euro) de contribution à un plan d’épargne retraite à traitement fiscal favorable, à partir d’une méthode de valeur présente. Cette dernière prend en compte les pertes futures de recettes fiscales découlant de la nontaxation des revenus d’intérêt ainsi que des recettes encaissées au moment de la perception des bénéfices par les détenteurs du plan de retraite. Le coût fiscal net est calculé pour neuf groupe d’âge (de cinq ans chacun), disposant de niveaux de revenus et d’horizons d’investissement différents. Le coût par groupe d’âge est ensuite aggrégé pour obtenir un coût moyen pour l’ensemble de la population. Les résultats indiquent que la valeur de l’incitatif fiscal varie de façon significative à travers les pays, passant de 40 cents par unité de contribution (République Tchèque) à près de zéro (Mexique, Nouvelle-Zélande). Plus de la moitié de pays de l’OCDE encourt ...</P>
    Keywords: comprehensive income tax, expenditure tax, private pension, net tax cost, revenue foregone method, Impôt sur le revenue, dépense fiscale, pension privée, coût fiscal net
    JEL: E21 G23 H21 H24 H31
    Date: 2004–10–14
  18. By: Neil Warren, Ann Harding and Rachel Lloyd
    Abstract: The past decade has seen major reforms to the design of Australia’s tax system. This paper outlines these reforms and examines their distributional impact across the household income spectrum. While the authors estimated tax incidence in Australia prior to the July 2000 (ANTS) reforms (which included the introduction of a 10% GST), no comprehensive estimates of the impact of these tax reforms have been made since that date. This paper addresses this deficiency. It finds that the personal income tax has become more income redistributive and more progressive over the period 1994-95 to 2001-02. However, the broad-based indirect tax reforms implemented over this period have become marginally more regressive and, because they have become more important as a revenue source, they now impact more adversely on post-tax income distribution. In the case of taxes other than the personal income tax and the reformed indirect taxes, they have become less regressive and have increased in importance. Overall, the progressivity of the Australian tax system and the distribution of post-tax income appears to have remained remarkably stable over the period.
    Keywords: Australia, Tax system, reform, income distribution, tax incidence, progressivity, tax
    Date: 2005–06–29
  19. By: Johannes Becker; Clemens Fuest
    Abstract: A widespread objection to the introduction of consumption tax systems claims that this would lead to high tax revenue losses. This paper investigates the revenue effects of a consumption tax reform in Germany. Our results suggest that the revenue losses would be surprisingly low. We find a maximum revenue loss of 1.6 percent of annual GDP. In some years, we even find a tax revenue gain. This implies that the current tax system collects little revenue from taxing the normal return to capital. Based on these results, we calculate a macroeconomic measure of the effective tax rate on capital income.
    Keywords: cash flow tax, tax revenue effects, effective taxation of capital income
    JEL: H21 H25
    Date: 2005
  20. By: Christian Keuschnigg; Martin D. Dietz
    Abstract: This paper proposes a growth-oriented dual-income tax by combining an allowance for corporate equity with a broadly defined flat tax on personal capital income. Revenue losses are compensated by an increase in the value added tax. The paper demonstrates the neutrality properties of the reform with respect to investment, firm financial decisions and organizational choice. Tax rates are chosen to prevent income shifting from labor to capital income. The reform decisively strengthens investment of domestically owned firms as well as home and foreign based multinationals and boosts savings. Simulations with a calibrated growth model for Switzerland indicate that the reform could add between 2 to 3 percent of GDP in the long run, depending on the specific scenario. Given the slow nature of capital accumulation, it also imposes considerable costs in the short run. We also consider a tax smoothing scenario to offset the intergenerationally redistributive effects.
    Keywords: tax reform, investment, financial structure, growth
    JEL: D58 D92 E62 G32 H25
    Date: 2005
  21. By: Douglas Hibbs (Göteborg University); Violeta Piculescu (Göteborg University)
    Abstract: In this paper we propose a model of how institutional benefits, taxation and government regulations affect the productive activity of private enterprises. We consider an environment in which public officials enforcing tax and regulatory obligations are potentially corruptible, and markets for corruption may therefore arise that give firms the option of producing unofficially and evading taxes and regulations. By contrast to some previous studies that view corruption and bribery as forces driving firms out of official production into the underground economy, our model features the idea that the `grabbing hands' of corrupt bureaucrats may alternatively serve as `helping hands' allowing firms to exploit profitable opportunities in the unofficial sector. And contrary to a traditional view maintaining that high tax rates are intrinsically a major cause of large shadow economies, our model implies that incentives to evade taxation and produce underground depend on statutory tax rates relative to firm-specific thresholds of tax toleration. Tax toleration is determined, among other things, by firm-specific institutional benefits available to official producers and the costs of corruption required to produce unofficially. Some core predictions of the model concerning the determinants of tax toleration and the relative size of unofficial activity and tax evasion receive broad support from empirical analyses based on firm-level data from the World Business Environment Surveys sponsored by the World Bank.
    Keywords: institutions corruption tax evasion unofficial economy underground economy
    JEL: D21 H26 K42 O17
    Date: 2005–08–05
  22. By: Indrani Roy Chowdhury (National Institute of Public Finance and Policy)
    Abstract: We examine the impact of abatement taxes on the pollution level in a duopoly framework with endogenous market structure. We demonstrate that an increase in abatement taxes could trigger a regime-switch from joint ventures to Cournot competition, causing the pollution level to increase. Moreover, abatement taxes can implement the first best outcome if and only if the industry is not too polluting. In case it is, the second best level of taxes may or may not equal the optimal tax under either joint venture, or Cournot competition.
    Keywords: Joint ventures, pollution, abatement tax, endogenous market structure
    JEL: H23 L13
    Date: 2005–05
  23. By: Ern Chen Loo and Juan Keng Ho
    Abstract: Salaried individuals in Malaysia will commence to comply with the self assessment system when they file tax returns on income derived in the year 2004. However, under the self assessment regime, salaried individuals need to possess some fundamental tax knowledge to file appropriate returns. This study examines white collar salaried individuals’ tax knowledge, particularly in relation to chargeable income and exemptions as well as relief, rebates and tax credits that are generally available to individual taxpayers. The findings reveal that a majority of those surveyed are not able to identify the correct year for which a given income should be chargeable and do not know of the chargeability or exemption of certain income. Besides the personal relief for self, relief for a wife and some relief for children, most do not know of the other relief, rebates and tax credits available, and are not aware of the options available in relation to joint assessment. Although the majority of the respondents had tertiary education, the findings also reveal that they do not possess adequate knowledge on matters pertaining to personal taxation. As such they may lack the competency to file appropriate tax returns under the self assessment system.
    Keywords: self assessment, Malaysia, tax compliance
    Date: 2005–06–29
  24. By: Liane Turner and Christina Apelt
    Abstract: The aim of this research was to apply a new conceptual framework to describe and explain the factors that have enabled the diffusion, adoption and operationalisation of electronic lodgement within the Australian tax system. The uptake of electronic lodgement of tax returns by both tax agents and taxpayers has increased significantly since introduction. Electronic lodgement of tax returns is part of a burgeoning global trend by OECD members to engage in and broaden the implementation of e-government applications. This research applied an eight factor framework to analyse the diffusion and adoption of electronic lodgement of tax returns within Australia. These eight factors were the circulation of ideas, national context, tax policy context, technological context, path of entry, effectiveness of champions, roles of key constituents and internal and external networks of support. The methodology comprised textual analysis and in-depth interviews. This study revealed that a coalescence of factors and actors were pivotal in enabling the diffusion and adoption of electronic lodgement services within the Australian national context. Globalisation, information exchange and advances in technology in computer hardware and software were key drivers. Contemporary issues in the Australian tax administration system and the broader national context were also influential. This study highlights that Australia was amongst the countries championing the global phenomenon of use of electronic lodgement services within tax authorities. The framework provided a comprehensive means to analyse and explain the diffusion and adoption of electronic lodgement strategies within the Australian environment.
    Keywords: electronic lodgement, tax system, Australia, Globalisation
    Date: 2005–04–22
  25. By: John Prebble
    Abstract: Professor Prebble’s paper considers the correct interpretation of double tax agreements in the context of locally resident accumulation trusts established in New Zealand or Australia, that have foreign settlors and foreign-source income. He explores the relevance and application of double tax agreements intended to minimise double taxation between New Zealand or Australia on the one hand and the source country on the other hand. In the process he identifies a difference in approach in Australia compared to New Zealand as they accord different treatment to accumulation trusts that have foreign settlors and foreign source income. The paper explores the reasons for, and the implications of, the different outcomes highlighting some key issues in tax administration where international tax is concerned.
    Keywords: double tax agreements, trusts, New Zealand, Australia, foreign-source income, international tax, tax administration
    Date: 2005–04–22
  26. By: Herwig Immervoll; Pascal Marianna; Marco Mira D’Ercole
    Abstract: <P><OL><LI>The OECD regularly produces estimates of tax burdens and benefit entitlements for a range of “typical household” situations. The results of these calculations (published in the <I>Benefits and Wages</I> and <I>Taxing Wages</I> series) are frequently used to compare countries’ tax-benefit systems and to assess progress towards specific policy objectives. This paper presents information on particular aspects of the structure of household populations across countries in order to help in the interpretation of results based on such “typical” family situations. A range of internationally comparable data sources are used to assess how relevant household circumstances such as family structure, labour market attachment and benefit coverage vary across countries. The results are used as a basis for clarifying the scope of tax-benefit indicators based on synthetically constructed household typologies.</LI></OL></P><P><OL><LI>“Typical household” calculations cannot be used to address essential distributional issues such as how ...</LI></OL></P> <P><OL><LI>L’OCDE publie régulièrement des évaluations des charges fiscales et des droits aux prestations en se servant d’un large échantillon de situations de ménages types. Les résultats de ces calculs (publiés dans les séries <I>Prestations et salaires</I> et <I>Les impôts sur les salaires</I>) sont souvent utilisés pour comparer le régime fiscal et le régime de prestations en vigueur dans les pays ainsi que pour évaluer le progrès à faire pour atteindre des objectifs de politique spécifiques. Ce document présente une information sur des aspects précis de la structure des ménages d’un pays à l’autre afin d’aider à l’interprétation des résultats basés sur des situations types de famille. Une gamme de sources de données, comparables à l’échelle internationale, est utilisée pour évaluer comment les différentes situations des ménages telles que la structure de la famille, les liens avec le marché du travail ou encore la couverture sociale varient d’un pays à l’autre. Ces résultats sont utilisés comme base ...</LI></OL></P>
    JEL: D3 H31 J0
    Date: 2004–12–17
  27. By: Nils Soguel (Swiss School of Public Administration-IDHEAP); Simon Iogna-Prat (Swiss School of Public Administration-IDHEAP); Toni Beutler (Swiss School of Public Administration-IDHEAP)
    Abstract: The IDHEAP has published its Comparison of Cantonal and Municipal Finances every year since 1999. The aim is to shed light on the fiscal condition of the Swiss public authorities. The comparison covers all institutional levels: the Confederation, the 26 cantons and a dozen cantonal capitals which rank among Switzerland's largest cities. The comparison is based on eight indicators. The result for each indicator is graded between 6 (excellent) and 1 (poor). This makes it possible to merge the indicators while weighting them on the basis of their significance. Thus, it is possible to judge the financial health of the canton, on the one hand, and the quality of its financial management, on the other hand, and, finally, to summarize its overall situation. To compare the situation of your local public authority visit the IDHEAP website.
    JEL: D6 D7 H
    Date: 2005–07–27
  28. By: Fluck, Zsuzsanna; Mayer, Colin
    Abstract: This paper investigates the governance structure choices of firms when there is competition between legal systems. We study the impact of the allocation of control over choice of governance and reincorporation on firms’ technologies and technological specialization of countries in the context of a model of the firm in which there are agency conflicts between shareholders and managers. We show that the allocation of control over firms’ reincorporation decisions determines the corporate governance choice ex ante and the outcome of the competition between legal regimes ex post. When managers have control over firms’ reincorporation then competitive deregulation and ‘runs to the bottom’ ensue. When shareholders have partial or full control then there is diversity in governance structures. Runs to the bottom are not necessarily socially undesirable but they have a feedback effect on firms’ choices of technologies that may make the party in control worse off ex ante. We show that it is impossible for any country to achieve social welfare maximization of its existing and new enterprises. With competition between legal regimes, start-up and mature companies incorporate in different jurisdictions even when reincorporation is correctly anticipated.
    Keywords: competition between legal systems; corporate governance; freedom or reincorporation; managerial private benefits; shareholder protection; technology choice
    JEL: G34 K22
    Date: 2005–07
  29. By: Bernard Paranque (Euromed Marseille Ecole de Management); Marcelline Grondin (GATE)
    Abstract: Une importante littérature empirique est dévolue à la question du lien entre les facteurs financiers et les performances économiques des firmes. Dérivées du rejet de l’hypothèse classique de non incidence de la structure financière sur la dépense ou inscrites plutôt dans une logique de repérage des canaux de transmission de la politique monétaire, ces études s’intéressent pour la plupart, à travers l’analyse du cash flow, au rôle de la position financière de la firme dans la dépense. Leurs résultats attestent tous de la validité statistique et quantitative des influences financières. Les interprétations diffèrent cependant et un grand débat demeure quant à l’imputation de ces empreintes. Peut-on en effet les attribuer à l’offre de financement ou sont-elles plutôt issues du comportement des firmes ? Dans cette étude, où nous nous intéressons à un échantillon d’entreprises industrielles françaises adhérentes à la Centrale des Bilans, nous proposons d’élargir la gamme des variables qui peuvent entrer dans la définition de la position financière et patrimoniale de la firme afin d’explorer la manière dont elles expliquent les comportements réels de celle-ci. Dans l’analyse des déterminants des composantes de la demande, nous tentons de tenir compte, en plus des variables réelles conformément aux modèles théoriques sous-jacents, de l’ensemble des ressources et réserves internes détenues par la firme. Nous considérons également la capacité de la firme à recourir aux financements offerts par les partenaires extérieurs et apprécions en cela les liens qu’elle entretient avec ses fournisseurs de capitaux à travers la considération des différentes formes de financement externe. En plus de l’investissement productif souvent analysé dans les travaux empiriques, nous proposons dans cette étude de tenir compte également de l’activité courante de gestion de la firme à travers l’analyse de son comportement de stockage. Les analyses sont effectuées en premier lieu sur les années 87 d’une part et 93 d’autre part, ce qui correspond à deux périodes de crise bien typées du point de vue du cycle économique et monétaire. Des analyses de données sont ensuite menées sur des années de reprise économique sur l’ensemble de la période 1986-1995 et nous permettent d’apprécier comparativement les premiers résultats.
    Keywords: accumulation, stockage, investissement, flexibilité financière, autonomie, découvert, régime de financement
    JEL: D1 D2 D3 D4
    Date: 2005–08–04
  30. By: Paul Makdissi (Département d'économique, Université de Sherbrooke); Jean-Yves Duclos (Pavillon De sève, Université Laval, Sainte-Foy, Québec, Canada)
    Abstract: This paper proposes graphical methods to determine whether commodity-tax changes are socially improving , in the sense of improving social welfare or decreasing poverty for large classes of social welfare and poverty indices. It also derives estimators of critical poverty lines and economic efficiency ratios which can be used to characterize socially-improving tax reforms. The statistical properties of the various estimators are derived in order to make the method implementable using survey data. The methodology is illustrated using Mexican data.
    Keywords: Social welfare, Poverty, Efficiency, Tax Reform, Stochastic Dominance
    JEL: D12 D63 H21 I32
    Date: 2001
  31. By: Petr Hedbávný; Ondrej Schneider; Jan Zápal
    Abstract: In this paper, we set out to examine an efficient fiscal-policy framework for a monetary union. We illustrate that fiscal policy’s bias toward budget deficit only temporarily ceased at the end of the 20th century as European countries endeavored to qualify for euro-zone membership, which compelled strict limits on budgetary deficits. We then explore which mechanisms might instill a sense of fiscal disciple in governments. We find that most mechanisms suffer from the incentive-incompatible setup whereby governments restrict their own fiscal-policy freedom. We argue that even multilateral fiscal rules, such as the EU’s Stability and Growth Pact, suffer from the same endogeneity flaw. Consequently, we argue that a fiscal rule must incorporate an external authority that would impartially assess fiscal-policy developments. Using U.S. debt and bond-market data at the state level, we show that financial markets represent a good candidate as, vis-à-vis the American states, they do differentiate state debt according to the level of debt. We thus argue for a fiscal institution––what we call the Fiscal Sustainability Council––that would actively bring financial markets into the fiscal-policy process, and we explain the technique whereby this could be effected.
    Keywords: fiscal policy, European Union, sustainability
    JEL: E60 H60 H87
    Date: 2005
  32. By: Natalie Lee
    Abstract: In her paper, Natalie Lee considers the implications for UK taxation of the European Convention for the Protection of Human Rights and Fundamental Freedoms, incorporated into UK law by the Human Rights Act 1998. The paper reviews the history of the Convention and the context in which it was framed. It examines what its effect on taxation has been thus far and it goes on to speculate as to its likely future impact, specifically in the context of the UK taxpayer. It concludes that although European Community law has applied in the UK for over thirty years it, and its implications, are only now coming to be understood. It is clear that taxpayers are perfectly prepared to mount an attack on the application of a tax law on grounds of breach of rights under the Convention and this will have implications for tax administration in future. The paper considers the likelihood of success of such challenges and notes that taxpayers mounting such challenges have, to date, had less success than citizens mounting challenges to more serious and fundamental infringements. This may continue to be the case in future, and indeed such an outcome may be justifiable in light of the need to balance “…the interests of the whole community and the protection of individual fundamental rights”.
    Keywords: Taxation, UK, Human rights, European community Law, Human Rights Act 1998
    Date: 2005–04–22

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