nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2007‒01‒02
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Reforming the Taxation of Multijurisdictional Enterprises in Europe, “Coopetition” in a Bottom-up Federation By Marcel Gérard
  2. How Successful is the Dual Income Tax? Evidence from the Finnish Tax Reform of 1993 By Jukka Pirttilä; Håkan Selin
  3. Has the Rise in Debt Made Households More Vulnerable? By Nathalie Girouard; Mike Kennedy; Christophe André
  4. Direct Evidence of Dividend Tax Clienteles By Dahlquist, Magnus; Robertsson, Göran; Rydqvist, Kristian
  5. Comparing alternative representations and alternative methodologies in business cycle accounting By V. V. Chari; Patrick J. Kehoe; Ellen R. McGrattan
  6. The Turkish Pension System:: Further Reforms to Help Solve the Informality Problem By Anne-Marie Brook; Edward Whitehouse

  1. By: Marcel Gérard
    Abstract: This paper investigates replacing separate taxation by consolidation and formulary apportionment in a Bottom-up Federation, when a multijurisdictional firm is mobile in various respects. The reform is decided cooperatively by all the jurisdictions or by some of them, while tax rates remain within the competence of each jurisdiction. The paper sets forth the conditions for the reform to be social welfare enhancing, while not increasing tax competition. Among them, the formula should emphasize criteria that the Multijurisdictional Enterprise cannot easily manipulate and the consolidating area should protect its capacity to levy taxes by adopting a crediting system, possibly extended to accrued capital gains, vis-à-vis the rest of the world. Policy conclusions are suggested accordingly.
    Keywords: taxation of multinational enterprises, consolidation and formulary apportionment, fiscal federalism
    JEL: H32 H73 H87
    Date: 2006
  2. By: Jukka Pirttilä; Håkan Selin
    Abstract: Dual income tax systems have become increasingly popular; yet, relatively little is known about the consequences of implementing such tax systems. This paper uses a representative panel of taxpayers from the 1993 Finnish tax reform to measure how overall taxable income and the relative shares of capital income and labour income reacted to the reform. The Finnish tax reform appears to be particularly suitable for analysing the effect of separating labour and capital income tax bases. The reform radically reduced the marginal tax rates on capital income to some, but not all, taxpayers, while the taxation of labour income was not reformed at the same time. We find that the reform led to a small positive impact on overall taxable income, but part of the positive response was probably offset by income shifting among the self-employed.
    Keywords: taxable income, income shifting, dual tax system
    JEL: C21 H21 H31
    Date: 2006
  3. By: Nathalie Girouard; Mike Kennedy; Christophe André
    Abstract: This paper reviews, for a number of OECD economies, macroeconomic developments in household balance sheets over the past two decades. The main findings show that the rise in household debt to historical levels has been driven by a combination of favourable financial conditions and buoyant housing markets. There have also been a number of supply-side innovations in credit markets that have eased the access to credit for lower income borrowers and reduced financial constraints for first-time homebuyers. Total household net wealth has risen and provided households with a financial cushion against a negative shock. That said, households in a number of countries have leveraged balance sheets and the sensitivity to house price and interest rate developments has likely increased. The paper then examines micro level information which suggests that most of the debt is held by households better able to manage it. In particular, the major part of debt is held by higher-income households, who also spend a smaller proportion of their disposable income servicing debts. Lower-income households, with less ability to service debt, do not hold that much and, as such, the spill over effects from this group to the rest of the economy are perhaps not large. Whether the situation remains benign or not is discussed in the final section of the paper. Estimates presented point to significant effects of changes in net wealth on household saving rates in a large number of the countries studied. <P>Les ménages sont-ils plus vulnérables du fait de leur endettement croissant? <BR>Cette étude examine pour un certain nombre de pays de l’OCDE, l’évolution macroéconomique des bilans des ménages depuis deux décennies. Le fait que l’endettement des ménages, en particulier sous la forme d’emprunts hypothécaires atteigne des niveaux records dans plusieurs pays tient à des conditions financières favorables et au dynamisme du marché du logement. En outre, un certain nombre d’innovations sont apparues du côté de l’offre sur le marché du crédit et ont facilité l’emprunt pour les titulaires de bas revenus tout en allégeant les contraintes financières pour les primo-acquéreurs. De plus, le patrimoine net des ménages a aussi cru et permet de protéger financièrement les ménages en cas de choc négatif. Cela étant, l’effet de levier des ménages semblent important dans plusieurs pays et la sensibilité à l’évolution des prix des logements et des taux d’intérêt s’est probablement accentuée. L'étude analyse ensuite des informations microéconomiques et montrent que la majeure partie de l’endettement est le fait des ménages les mieux à même de le gérer. En particulier, la dette a été surtout contractée par les ménages à revenu élevé, qui affectent une plus faible proportion de leur revenu disponible au service de leur dette. Les ménages à bas revenu, dont la capacité de service de la dette est moindre, ne représentent pas une aussi forte proportion de l’endettement, de sorte que l’impact de la situation de cette catégorie sur le reste de l’économie n’est sans doute pas très marqué. Les conséquences de ce phénomène sont discutées dans la dernière partie de cette étude. Les estimations suggèrent des effets de richesse important sur le taux d'épargne des ménages dans plusieurs pays.
    Keywords: housing market, household debt, household assets, endettement des ménages, actifs des ménages, marché des logements
    JEL: D1 E21
    Date: 2006–12–13
  4. By: Dahlquist, Magnus; Robertsson, Göran; Rydqvist, Kristian
    Abstract: We study a large data set of stock portfolios held by individuals and organizations in the Swedish stock market. The dividend yields on these portfolios are systematically related to investors' relative tax preferences for dividends versus capital gains. Tax-neutral investors earn 40 basis points higher dividend yield on their portfolios than investors which face higher effective taxation of dividends than capital gains. We conclude that there are dividend tax clienteles in the market. We also argue that the abundant portfolio holdings by closely-held corporations, despite triple taxation at a combined marginal tax rate as high as 77.5%, is a consequence of taxation.
    Keywords: capital gains tax; dividend tax clienteles; stock ownership; Tax incidence
    JEL: G11 G35
    Date: 2006–12
  5. By: V. V. Chari; Patrick J. Kehoe; Ellen R. McGrattan
    Abstract: We make two comparisons relevant for the business cycle accounting approach. We show that in theory representing the investment wedge as a tax on investment is equivalent to representing this wedge as a tax on capital income as long as the probability distributions over this wedge in the two representations are the same. In practice, convenience dictates differing probability distributions over this wedge in the two representations. Even so, the quantitative results under the two representations are essentially identical. We also compare our methodology, the CKM methodology, to an alternative one used in Christiano and Davis (2006) as well as by us in early incarnations of the business cycle accounting approach. We argue that the CKM methodology rests on more secure theoretical foundations.
    Date: 2006
  6. By: Anne-Marie Brook; Edward Whitehouse
    Abstract: Recent social security reform has significantly improved the long-run sustainability of the pension system. However, the pension system continues to serve as an important barrier to a more rapid expansion of the formal-sector economy in two ways. First, early-retirement incentives (including severance payments) continue to push many incumbent formal sector workers into the informal sector, often at ages as young as 40-45. While new labour force entrants face a much higher retirement age, policies for incumbents are fiscally expensive, inequitable, and serve to swell the ranks of the informal sector. Second, even when the transition to the new pension rules is complete, net replacement rates will remain very high by OECD standards, requiring high social security contribution rates that make it too expensive for firms to employ low-skilled labour in the formal sector. Thus, further pension reform is one of the keys to overcoming Turkey’s economic duality. Finally, since the pension system does not cover the informal sector, it does little to alleviate poverty among the wider population of older people. This paper discusses a number of reforms that would increase the retirement age, reduce inter-generational inequities, and permit a significant cut in the tax wedge on labour, while better addressing old-age poverty concerns at all levels of income. <P>Le système des retraites en Turquie: : Les réformes supplémentaires pour aider à résoudre le problème de l’informalité <BR>La récente réforme de la sécurité sociale a amélioré largement la viabilité à long terme du système de retraite. Cependant, la structure de ce dernier reste un important obstacle à une expansion plus rapide de l’économie formelle, pour deux raisons. Premièrement, du fait des incitations à une retraite anticipée (telles que les indemnités de départ), de nombreux travailleurs du secteur formel continuent à rejoindre le secteur informel, souvent à un jeune âge comme 40-45 ans. Alors que les nouveaux entrants dans le marché du travail prendront leur retraite à un âge bien plus élevé, les politiques concernant les travailleurs déjà actifs sont coûteuses pour les finances publiques, ne sont pas équitables et nourrissent le secteur informel. Deuxièmement, même lorsque le passage aux nouvelles règles régissant les retraites sera achevé, les taux de remplacement nets seront encore très généreux par rapport aux niveaux observés dans la zone OCDE, avec des taux de cotisation élevés qui dissuadent les entreprises du secteur formel d’employer une main-d’oeuvre peu qualifiée. En conséquence, la poursuite de la réforme des retraites est fondamentale pour surmonter ce dualisme économique. Enfin, parce qu’il ne couvre pas le secteur informel, le système de retraite ne contribue guère à atténuer la pauvreté au sein de la population âgée. Ce chapitre examine plusieurs réformes qui repousseraient l’âge de la retraite, réduiraient les inégalités intergénérationnelles et feraient diminuer significativement le coin fiscal sur le travail, tout en répondant mieux aux préoccupations suscitées par la pauvreté des personnes âgées à tous les niveaux de revenu.
    JEL: D10 H55 J14 J18
    Date: 2006–12–08

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