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on Accounting and Auditing |
| By: | Lipatov, Vilen |
| Abstract: | We analyze the tax evasion problem with social interaction among the taxpayers. If the authority commits to a fixed auditing probability, a positive share of cheating is obtained in equilibrium. This stands in contrast to the existing literature, which yields full compliance of audited taxpayers who are rational and thus do not need to interact. When the authority adjusts the auditing probability every period, cycling in cheating-auditing occurs. Thus, the real life phenomenon of compliance fluctuations is explained within the model rather than by exogenous parameter shifts. Our analysis can also be applied to crime, safety regulations, employment and environmental protection, as well as other compliance problems. |
| Keywords: | tax evasion; learning; social interaction; behavioral rule; compliance |
| JEL: | C79 D83 K42 H26 |
| Date: | 2008–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8829&r=acc |
| By: | Judith Freedman (University of Oxford); Claire Crawford (Institute for Fiscal Studies) |
| Abstract: | This chapter considers the taxation of small, owner-managed businesses. It focuses on the difficulties created by treating employees, unincorporated and incorporated businesses differently for tax and social security purposes. The authors reject blanket tax incentives for small firms and differentiation between legal forms and concentrate on issues arising from opportunities created on incorporation for the conversion of income from labour into income from capital (taxed at a lower rate). Experience in the UK and elsewhere suggests that an approach that relies on defining a sub-category of small businesses will not produce a satisfactory solution. The chapter therefore examines methods of aligning the effective tax treatment of different legal forms: in particular it considers the advantages of combining a Rate of Return Allowance with an Allowance for Corporate Equity, so as to tax income above the normal return to capital at the same rate whether it is described as dividend, capital gain or salary. |
| Keywords: | Small business taxation, labour income taxation, social security, taxation of income from capital, incorporation, corporation tax, choice of legal form, rate of return allowance, allowance for corporate equity |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:btx:wpaper:0806&r=acc |
| By: | Gilbert E. Metcalf |
| Abstract: | Federal deductibility for state and local taxes constitutes one of the largest tax expenditures in the federal budget and provides a significant source of federal support to state and local governments. Deductibility was restricted in the Tax Reform Act of 1986 by removing the deduction for general sales taxes. More recently the President's Advisory Panel on Federal Tax Reform recommended eliminating the deduction altogether as one of several revenue-raising initiatives to finance comprehensive tax reform. I carry out a number of distributional analyses – considering both variation across income and across states – of the subsidy from deductibility as well as the distributional impact of potential partial reforms. In addition, I consider three counterfactuals for 2004 – a tax system without the Bush tax cuts for 2001 and 2003, a tax system without the 2004 AMT patch, and a tax system without the AMT – to see how the benefits of deductibility are affected by these changes in the tax law. Next I consider how behavioral responses affect the tax expenditure estimates. Feldstein and Metcalf (1987) argued that tax expenditures overestimate the revenue gain from eliminating deductibility as they do not take into account a likely shift away from once-deductible taxes to non-deductible taxes and fees in the absence of deductibility. Many of these latter taxes and fees are paid by businesses. As business costs rise, federal business tax collections would fall, offsetting some of the gains of ending deductibility. Feldstein and Metcalf also found that ending deductibility would have little if any impact on state and local spending itself. Using a large panel of data on state and local governments, I revisit this issue and find that the Feldstein-Metcalf results are robust to adding more years of analysis. |
| JEL: | H2 H71 H77 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14023&r=acc |
| By: | NUTAHARA Kengo; INABA Masaru |
| Abstract: | Equivalence results in business cycle accounting imply that the prototype model with time-varying wedges can achieve the same allocation generated by a large class of frictional detailed models. Conventionally, the process of wedges is specified to be the first order vector autoregressive. In this paper, we characterize the class of models covered by the prototype model under the conventional specification and find that it is much smaller than that believed in previous literature. We also provide an alternative specification in order to let the prototype model cover a much larger class. |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:08015&r=acc |