nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2006‒12‒09
four papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Case for Measuring Tax Gap By Jacqui McManus and Neil Warren
  2. IT Adoption Strategies and their Application to e-filing Self-Assessment Tax Returns: The Case of the UK By Ann Hansford, Andrew Lymer and Catherine Pilkington
  3. Taxing Capital? Not a Bad Idea After All! By Conesa, Juan Carlos; Kitao, Sagiri; Krüger, Dirk
  4. Relation between Cyclically Adjusted Budget Balance and Growth Accounting Method of Deriving ‘Net Fiscal Effort’ By Jan Zápal

  1. By: Jacqui McManus and Neil Warren
    Abstract: More recently an increasing number of revenue authorities have attempted to estimate the amount of tax that is legally owing to their government but not collected. This amount is commonly referred to as ‘tax gap’. In the past tax gap studies were branded unreliable. Tax administrations and other bodies criticised any attempts at quantifying tax non-compliance on the basis that it was costly and inconclusive. However based on the significant number of tax gap studies undertaken recently there appears to have been a change of heart. This paper considers a range of tax gap studies for the purpose of identifying the core reasons they were undertaken, highlighting their benefits and limitations.
    Keywords: tax gap, hidden economy, tax administration, tax, non-compliance
    Date: 2006–10–17
  2. By: Ann Hansford, Andrew Lymer and Catherine Pilkington
    Abstract: This article considers Information Technology (IT) adoption strategies as applied to the particular circumstances of e-filing UK Self Assessment (SA) Tax returns . It reports the findings from a study that involved three interested groups in the UK; tax advisers, tax authorities and software providers. IT adoption issues, as applied to a wide range of business situations, are considered in detail in order to set the study into context. The current study, which builds on the findings of a previous UK quantitative study, involved ten in-depth interviews with representatives from the three interested groups – tax advisers, tax authorities and software providers - in order to consider broader aspects of e-filing SA tax returns. The interviews identified that IT adoption is usually a ‘top-down’ decision. The availability of suitable and developing IT tax software is important for tax advisers; as is the perception of the user-friendliness of the HM Revenue and Customs (HMRC) IT system. Pre-adoption concerns for tax advisers mainly centred on how e-filing would fit in with their current practice and the benefits, or otherwise of introducing IT. Post-adoption discussion centred on the wider benefits of IT adoption and the ease of use of the e-filing systems. Tax advisers in the study were clear about areas that could influence their decisions to e-file SA tax returns. Getting over the apprehensiveness of the reluctant IT adopters required good software products that fitted in with other office functions, overcoming any reluctance to trust HMRC IT capabilities and operational efficiencies. Security and privacy were of significant concern to tax advisers but visibility was of little importance. Overall, there was a positive assessment of e-filing SA tax returns. The study showed that e-filing was expected to expand to all but the most reluctant tax adviser practices within the next five years.
    Keywords: e-filing, tax, tax law, self-assessment, tax returns, IT, UK, tax administration
    Date: 2006–10–17
  3. By: Conesa, Juan Carlos; Kitao, Sagiri; Krüger, Dirk
    Abstract: In this paper we quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks, where households also differ permanently with respect to their ability to generate income. The welfare criterion we employ is ex-ante (before ability is realized) expected (with respect to uninsurable productivity shocks) utility of a newborn in a stationary equilibrium. Embedded in this welfare criterion is a concern of the policy maker for insurance against idiosyncratic shocks and redistribution among agents of different abilities. Such insurance and redistribution can be achieved by progressive labor income taxes or taxation of capital income, or both. The policy maker has then to trade off these concerns against the standard distortions these taxes generate for the labor supply and capital accumulation decision. We find that the optimal capital income tax rate is not only positive, but is significantly positive. The optimal (marginal and average) tax rate on capital is 36%, in conjunction with a progressive labor income tax code that is, to a first approximation, a flat tax of 23% with a deduction that corresponds to about $6,000 (relative to an average income of households in the model of $35,000). We argue that the high optimal capital income tax is mainly driven by the life cycle structure of the model whereas the optimal progressivity of the labor income tax is due to the insurance and redistribution role of the income tax system.
    Keywords: capital taxation; optimal taxation; progressive taxation
    JEL: E62 H21 H24
    Date: 2006–11
  4. By: Jan Zápal (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; London School of Economics and Political Science)
    Abstract: This paper deals with the growth accounting method used for derivation of so called net fiscal effort. Net fiscal effort can then provide a clue whether fiscal policy is expansionary or not and together with the data about economic performance can answer the question of pro- or anti-cyclicality of fiscal stance. Traditionally, answer to such questions has been provided via cyclically adjusted budget balance measure. I argue that relatively computational intensive and data demanding process of estimation of cyclically adjusted budget balance can be without significant loss of information replaced by simple growth accounting method. I argue that in general case, answers provided via growth accounting method will not differ widely from the conclusions provided via cyclically adjusted budget balance. I then illustrate on Czech fiscal data use of growth accounting and compare the outcomes of both methods. Conclusions reached in the empirical part fit nicely conclusions of the theoretical part of the paper.
    Keywords: Expansionary/Contractionary Fiscal Policy; Cyclically Adjusted Budget Balance; Growth Accounting; Net Fiscal Effort
    JEL: C82 H62
    Date: 2006–04

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