nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2007‒07‒13
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Coupling Performance Measurement and Collective Activity: The Semiotic Function of Management Systems. A Case Study By Lorino, Philippe; Gehrke, Ingmar
  2. Is a Flat Tax politically feasible in a grown-up Welfare State? By Fuest, Clemens; Peichl, Andreas; Schaefer, Thilo
  3. Is there a Displacement Deadweight Loss from Tax Evasion? Estimates Using Firm Surveys from the Czech Republic By Hanousek, Jan; Palda, Filip
  4. What Future for the Corporate Tax in the New Century? By Richard S. Simmons

  1. By: Lorino, Philippe (ESSEC Business School); Gehrke, Ingmar (ESSEC Business School)
    Abstract: Theories about management instruments often enter dualistic debates between structure and agency: do instruments determine the forms of collective activity (CA), or do actors shape instruments to their requirements, or are instruments and concrete activity decoupled, as some trends of new institutionalist theory assume? Attempts to overcome the dualistic opposition between structure and activity stem from diverse sources: actors’ networks theory, structuration theory, pragmatism, theory of activity, semiotics. Performance measurement and management systems can be defined as structural instruments engaged in CA. As such they constrain the activity, but they do not determine it. Reciprocally, they are modified by the way CA uses them and makes sense of them. The central thesis of this paper will be that it is impossible to study the role of performance measurement as a common language in organizations independently from the design of the CA in which it is engaged. There is a not deterministic coupling between structure (i.e. management technical tools) and CA (i.e. business processes). The transformation of CA entails a transformation in the meaning of the “performance” concept, in the type of measurement required and in the performance management practices. The relationship between performance measurement and CA is studied here in the production division of a large electricity utility in France. The research extended over several years and took place when two new management systems were simultaneously implemented: a new management accounting system and an integrated management information system (ERP), both in the purchasing process. The new management accounting system was designed by the purchasing department; the new management information system was designed by the operational departments. Whereas the coherence between both projects could have been given by their common subordination to the rebuilding of CA (the purchasing process), their disconnection from concrete CA opened the possibility of serious dissonances between them. <p> Both the new performance management system and the new ERP met difficulties to provide common languages, since the dimension of CA was taken for granted and consequently partly ignored in the engineering of both systems. When CA incurs radical transformations, actors’direct discursive exchanges about it, “collective activity about collective activity”, become necessary to ensure a flexible and not deterministic coupling between CA and new management systems. This reflexive and collective analysis of the process by actors themselves requires the establishment of “communities of process”, which can jointly redesign the CA and its performance measurement system. We conclude that performance measurement can be a common language as far as there is a clear and shared understanding of how CA should concretely take place and should be assigned to the different categories of actors.
    Keywords: Business Process; Collective Activity; Community of Process; Management Instruments; Performance Measurement; Semiotics; Theory of Activity
    JEL: Z00
    Date: 2007–05
  2. By: Fuest, Clemens; Peichl, Andreas; Schaefer, Thilo
    Abstract: The introduction of a flat tax is supposed to have several advantages. Administration and compliance costs are reduced, as well as incentives for tax evasion. Furthermore, positive employment and growth effects are expected. Despite these advantages, a flat rate tax is not very popular in most Western European countries. The most important objection against a flat tax states that a flat rate tax would be inequitable and unfair. The present paper uses a simulation model based on a unique database of German micro data to provide empirical evidence for the analysis of the equity and efficiency effects as indicators for the political feasibility of flat rate tax reforms. Our analysis shows that the selection of the schedule and tax base parameters are crucial for the e¤ects of flat tax reforms in terms of equity and efficiency. A flat rate tax with a higher basic allowance and a higher single rate has less harmful distributional effects than a flat rate tax with low basic allowance and tax rate. Nevertheless, the scenario with the lowest parameter values for basic allowance and tax rate is the only alternative that leads to positive labour supply and significantly positive welfare effects. Both labour supply and static welfare e¤ects, however, are quite small. Although we have derived our results for the case of Germany, we do think that similar patterns would be observed in other countries of Western Europe. If this proves to be correct, it will be hard for ‡at tax reforms to invade the grown-up welfare states of "Old Europe".
    Keywords: Flat Tax reform, equity, efficiency, distribution, welfare
    JEL: D31 D60 H20
    Date: 2007
  3. By: Hanousek, Jan; Palda, Filip
    Abstract: In the presence of the underground economy taxes give rise to a deadweight loss from displacement of efficient producers by inefficient producers. We consider an economy in which a producer faces two types of costs: the cost of production, and taxes. If the ability to evade taxes is inversely proportional to the ability to keep production costs down, high tax rates may cause inefficient producers to crowd out efficient producers. We estimate this deadweight loss from surveys of 426 Czech firms taken in 2004 and 2005. We find that the deadweight loss due to this crowding out can be several times as large as the triangle deadweight losses from discouraged consumption. Our paper provides the first estimates ever of the displacement loss from tax evasion.
    Keywords: Underground economy; social cost of public funds; taxation.
    JEL: H26 H21
    Date: 2007–06
  4. By: Richard S. Simmons
    Abstract: It has long been recognised that the corporate tax suffers from several inherent deficiencies. However, in recent years, the transformation and integration of the world economy have exacerbated and highlighted these weaknesses, placing a question mark over the future of the tax. Through an examination of the problems besetting the tax today, a critical analysis of the conventional arguments supporting it, and a review of economic and political factors relevant to its continued existence, this article considers its future in the new century.
    Keywords: corporate taxation, tax revenues, tax competition
    Date: 2007–07–05
  5. By: Shah, Deepak
    Abstract: The study showed a reduction in the operational efficiency of the selected PACS during the post-economic reform period as against the pre-economic reform period. The operational efficiency was measured in respect of various liquidity ratio, profitability ratios and financial leverage ratios. Not only the selected societies showed a decline in their current ratio, rate of return on assets, return on owner’s equity and Marginal Efficiency of Capital (MEC) but also showed higher dependency on lender’s capital for their finances. This dependency was seen to be higher in the case of ‘A’ graded society. Nonetheless, ‘A’ graded society showed an improvement in its permanent capital. Further, as for ‘A’ graded society, there was not much improvement in the net worth, and in fact the share of net worth in its total liability had declined in the post-economic reform period. The declining share of net worth had caused an increase in debt-asset ratio of this society during the latter period. The return on owner’s equity of the selected societies were seen to fall sharply during the post-economic reform period. Since the return on owner’s equity is a function of as to how efficiently a firm manages its assets, the net profit margin on sales and the degree of financial leverage, a reduction in this equity could, therefore, be considered as a sign of reduction in the efficiency of the societies in managing their assets and liabilities, and also income and expenditure pattern during the latter period as against the former period. The reform initiatives could be held responsible for this moribund state of cooperative credit sector. Due to unfavourable policy framework, much of the rural finances extended through cooperatives are now going into investment rather then extending loans to farming sector. The need of the hour is not to rely on the financial sector reforms but tackling issues such as sustainability of and viability of these credit cooperatives.
    Keywords: Viability Measurement Reform Period
    JEL: R11 R1
    Date: 2007–07–05

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