nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2007‒09‒24
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. On the importance of clean accounting measures for the tests of stock market efficiency By Mattias Hamberg; Jiri Novak
  2. Profit Shifting by Multinationals: Indirect Evidence from European Micro Data By Dischinger, Matthias
  3. Tax Evasion and Economies in Transition: Lessons from Tax Theory By Pirttilä, Jukka
  4. The legacy of the Swedish gift and inheritance tax, 1884–2004 By Ohlsson, Henry
  5. Black cash tax evasion in Russia: Its forms, incentives and consequences at firm level By Yakovlev , Andrei

  1. By: Mattias Hamberg (Göteborg University, Sweden); Jiri Novak (Uppsala University, Sweden)
    Abstract: Tests of the semi-strong form of the efficient market hypothesis (EMH) typically use earnings and book value of equity as benchmarks of fundamental value. Accounting earnings, however, are contaminated by noise due to their transient component and book value of equity tends to be biased downwards due to accounting conservatism. We investigate whether controlling for these effects impacts on the implications concerning the information efficiency of the Swedish stock market. We conclude that relevant adjustments increase both the magnitude and the consistency of the value premium earned on a contrarian investment strategy that buys (shorts) stocks with low (high) relative market valuation. The existence of the value premium cannot be explained by common risk proxies or transaction costs argument. Using cleaner accounting proxies thus strengthens the evidence on the imperfect efficiency of the Swedish stock market.
    Keywords: market efficiency, investment, contrarian strategy, transitory earnings, accounting conservatism, Sweden, Scandinavia
    JEL: G14
    Date: 2007–09
  2. By: Dischinger, Matthias
    Abstract: We provide indirect empirical evidence of profit shifting behavior by multinational enterprises. This issue is analyzed in an econometric panel study for the years 1995 to 2005 and additionally in a cross-section for 2004 using a large micro database of European subsidiaries of multinationals (AMADEUS) which includes detailed balance sheet items. Our results show a decrease in the unconsolidated pre-tax profits of an affiliated company of approximately 7% if the difference in the statutory corporate tax rate of this affiliate to its parent increases by 10 percentage points. Various robustness checks support our profit shifting evidence. Furthermore, the results suggest an overall shift of profits out of the European Union. In addition, we provide evidence that a higher parent's ownership share of its subsidiary leads to intensified profit shifting behavior.
    Keywords: corporate taxation; multinational enterprise; tax planning; profit shifting; micro level data; panel econometrics
    JEL: H25 H26 F23 C33
    Date: 2007–09
  3. By: Pirttilä, Jukka (BOFIT)
    Abstract: This study considers the pervasive tax evasion of transition economies, with particular reference to Russia’s tax system. Starting with a survey of theoretical literature on tax evasion and corruption, it argues that, although standard tax theory offers many insights, certain special features of transition economies deserve attention. These include the legacy of socialism resulting in a state willing to exercise discretionary power but possibly lacking credibility and public support, the ‘disorganisation’ phenomenon that hampers efficient tax administration, and the relationship of restructuring, speed of reform and the tax system. The paper also contains recommendations on reform of the tax system to achieve reasonable deterrence of evasion.
    Keywords: tax evasion; corruption; transition economies; Russia
    Date: 2007–09–14
  4. By: Ohlsson, Henry (Department of Economics)
    Abstract: This paper has two objectives. The first is to study the revenue from the gift, inheritance, and estate taxes in Sweden during more than a century. The second is to focus on a unique episode during the second half of the 1940s when gifts and gift tax revenue exploded. This episode has never before been discussed in the research literature. It gives an extremely clear illustration of behavioral response to taxes in general, and the impact of expectations of future tax increases in particular. It is also a very interesting episode in the economic history of Sweden. I have access to aggregate tax revenue data since 1884. Moreover, I have constructed a rich micro data set of all gifts reported during the period 1942–1949 in one county. A first main result is that gift tax revenue during the 1940s started to increase long before a new estate tax and increased wealth taxation were decided and implemented. The increase even began before the legislative process started. Second, both the number and the average values of gifts increased. Promissory notes were, in value, the most common way to give. Finally, gifts, inheritances, and estates were never important sources of tax revenue. Revenue as a share of GDP reached a peak already in the 1930s. The role of these taxes has instead primarily been equity and to provide integrity for other tax bases.
    Keywords: gift tax; inheritance tax; estate tax; tax avoidance; expectations
    JEL: D10 D31 H24 N33 N34
    Date: 2007–09–10
  5. By: Yakovlev , Andrei (BOFIT)
    Abstract: This paper discusses Russia’s "black cash" economy. Using interviews and survey data, we examine the mechanics of several distinctly Russian tax evasion schemes and attempt a rough estimate of the scale and dynamics involved in tax evasion based on black cash. Entrepreneurs’ opinions are also used to get an idea of the incentives and costs of black cash tax evasion. We next describe the apparent economic consequences of black cash tax evasion and formulate general formal conditions for successful evasion at firm level. Finally, we recommend several policy measures to reduce the incentives to such behaviour and discuss questions for future research.
    Keywords: tax evasion; informal business activity; black cash; Russia
    Date: 2007–09–14

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