nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2007‒07‒27
three papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Tax Harmonisation in Europe: The Determination of Corporate Taxable Income in the EU Member States By Oestreicher, Andreas; Spengel, Christoph
  2. Keeping it off the Books: An Empirical Investigation of Firms that Engage in Tax Evasion By Tedds, Lindsay
  3. The Non-neutrality of Corporate Tax: An Entrepreneurial Perspective By Filoso, Valerio

  1. By: Oestreicher, Andreas; Spengel, Christoph
    Abstract: The aim of this paper is twofold. First, we want to examine whether and if so, to what extent, the concept of International Financial Reporting Standards (IFRS) meets the requirements of a Common Consolidated Corporate Tax Base (CCCTB) for the EU-wide activities of multinationals as proposed by the European Commission. Second, we estimate the consequences on the effective levels of company tax burdens in selected EU member states if IFRS are considered as a tool for defining the tax base. Our analysis reveals that IFRS could provide elements of a common and harmonised European tax base in certain areas. In particular, tax accounting still has to follow the realisation principle. Therefore, IFRS “fair value-accounting” cannot be adopted for tax purposes. A transition to tax accounting on the basis of IFRS has only minor effects on the effective tax burdens of companies.
    Keywords: International Company Taxation, Effective Tax Burden, Tax Accounting
    JEL: H21 H25
    Date: 2007
  2. By: Tedds, Lindsay
    Abstract: This paper uses a unique and recently available dataset that contains detailed information on firms from around the world to investigate factors that affect under-reporting behaviour by firms. The empirical strategy employed exploits the nature of the dependent variable, which is interval coded, and uses interval regression which provides an asymptotically more efficient estimator than the ordered probit, provided that the classical linear model assumptions hold. These assumptions are investigated using standard diagnostic tests that have been modified for the interval regression model. Evidence is presented that shows that firms in all regions around the world engage in under-reporting. Regression results indicate that government corruption has the single largest causal effect on under-reporting, resulting in the percentage of sales not reported to the tax authority being 53.4 percent higher. Taxes have the second single largest causal effect on under-reporting, resulting in the percentage of sales not reported to the tax authority being 20.2 percent higher. Access to financing, organized crime, political instability and the fairness of the legal system were found to have no effect on under-reporting. It is also found that there is a significant correlation between under-reporting and the legal organization of the business, size, age, ownership, competition and audit controls.
    Keywords: Underground Economy; Tax Non-compliance; Firm Characteristics; Interval Regression
    JEL: C24 O17 D21
    Date: 2007–07
  3. By: Filoso, Valerio
    Abstract: While corporate taxation is a major issue in the debate over international finance, economic theory has no clear stance on who bears its burden. On balance, economists seem still more prone to accept that taxing profits does not affect corporations' outcomes. This paper makes three cases for non-neutrality. First, since corporate taxation is asymmetric between profit and loss, the tax rate may change the ranking of alternative investments. Secondly, the imperfect observability of the use of internal resources makes pure economic profits very difficult to detect. Thirdly, when the pervasive role of entrepreneurship is fully taken into account, corporate taxation appears clearly as a direct tax on market adjustments and as an indirect tax on wages.
    Keywords: Corporate Taxation; Entrepreneurship; Tax Incidence; Austrian Economics
    JEL: H22 L26 B25 H25
    Date: 2007–07–20

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