nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2009‒09‒11
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Marginal versus Average Beta of Equity under Corporate Taxation By Lund, Diderik
  2. Informal Sector and Taxation By Jellal, Mohamed
  3. ISEL: An e-Taxation System for Employers By Olivier Glassey; Alain Sandoz
  4. Mutual Fund Tax Clienteles By Clemens Sialm; Laura Starks
  5. Incidence of an outsourcing tax on intermediate inputs By Subhayu Bandyopadhyay
  6. Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data By Richard V. Burkhauser; Shuaizhang Feng; Stephen P. Jenkins; Jeff Larrimore

  1. By: Lund, Diderik (Dept. of Economics, University of Oslo)
    Abstract: Even for fully equity-financed firms there may be substantial effects of taxation on the after-tax cost of capital. Among the few studies of these effects, even fewer identify all effects correctly. When marginal investment is taxed together with inframarginal, marginal beta differs from average if there are investmentrelated deductions like depreciation. To calculate asset betas, one should not only "unlever" observed equity betas, but "untax" and "unaverage" them. Risky tax claims are valued as call options, with closed-form solutions for the exercise probability. Results have practical relevance for multinationals operating under different tax systems.
    Keywords: Cost of capital; WACC; loss offset; tax shields; options
    JEL: F23 G31 H25
    Date: 2009–06–09
  2. By: Jellal, Mohamed
    Abstract: In this paper, we present a model of tax evasion in the presence of imperfect auditing. We show that there is a clear link between the degree of observability associated with a given taxpayer or activity and that taxpayer’s optimal declaration strategy with respect to fiscal agency. We also show that the degree of observability is critical in determining the optimal policies to be followed by the fiscal authorities. Our imperfect monitoring approach provides a new strategy for understanding the informal sector in LDCs, which can be interpreted as that group of economic activities characterized by low observability.
    Keywords: Informal sector;information and observability;tax evasion;taxation
    JEL: D21 O17 H26 O12
    Date: 2009–08–02
  3. By: Olivier Glassey (IDHEAP - Institut de hautes études en administration publique - Swiss Public Administration Network); Alain Sandoz (e-Government Research Unit - Université de Neuchatel)
    Abstract: In 2008 the State of Geneva modified its regulation on taxation at source in order to collect electronic fiscal data from employers. Indeed the latter provide data on their employees directly to the tax administration (AFC) and furthermore pay taxes to the State on behalf of their employees. They subtract the corresponding amounts from employees' income and refund that money to the fiscal administration. The taxation at source system is applied to foreigners who work in Switzerland or who receive Swiss pensions, to people who live in Geneva but work in other Cantons, as well as to performers, artists or speakers who work occasionally in Geneva. More than 12'000 companies and 117'000 employees are concerned by the scheme, and large companies provide data on several thousand employees. In the past these files provided by employers were handled semi-automatically by the AFC (at best). The new system (called ISEL for Impôt à la Source En Ligne) offers employers two electronic channels to provide data on employees: file transfer (.XSD) and internet e-form. This case study describes the ISEL project and its context, and discusses the issues raised by the introduction of this e-taxation system. On the human side, our paper takes a qualitative approach, based on interviews of various stakeholders involved in the project. They were asked questions on ISEL's functionality, usability, performance, and so on. On the technical side, the paper presents the architecting principles of the e-government approach in Geneva (Legality, Responsibility, Transparency and Symmetry) and the workflow that was implemented on top of AFC's legacy system.
    Keywords: private public partnership; tax collection; e-services; e-government; data exchange; architecture; usability
    Date: 2009–06–29
  4. By: Clemens Sialm; Laura Starks
    Abstract: Mutual funds are pooled investment vehicles with diverse tax clienteles. Whereas many mutual funds are held primarily by taxable investors, a significant fraction of mutual fund assets are held in tax-qualified retirement accounts. Our paper investigates whether the characteristics, investment strategies, and performance of mutual funds held by diverse tax clienteles differ. Examining both mutual fund income distributions and mutual fund holdings, we find that funds held primarily by taxable investors tend to be more tax-efficient than funds held primarily in tax-deferred retirement accounts. Despite these differences, we find no evidence that any investment constraints that may arise from the funds that pursue tax efficient management strategies result in performance differences between funds held by different tax clienteles.
    JEL: G11 G12 G23 G35 H24
    Date: 2009–09
  5. By: Subhayu Bandyopadhyay
    Abstract: The paper uses a Hecksher-Ohlin-Samuelson type general equilibrium framework to consider the incidence of an outsourcing tax on an economy in which the production of a specific intermediate input has been fragmented and outsourced. When the input is ?non-traded?, the outsourcing tax can reduce domestic wages even if the intermediate input producing sector is the most capital-intensive sector of the economy. This implies that contrary to received wisdom, a tax on a capital-intensive sector may actually hurt labor. On the other hand, if the intermediate input is traded, the outsourcing tax must close down the final good producing sector that uses it specifically in its production. In turn, this may force the government to look for additional policy instruments to help sustain this domestic industry.
    Keywords: Contracting out ; Taxation
    Date: 2009
  6. By: Richard V. Burkhauser; Shuaizhang Feng; Stephen P. Jenkins; Jeff Larrimore
    Abstract: Although the vast majority of US research on trends in the inequality of family income is based on public-use March Current Population Survey (CPS) data, a new wave of research based on Internal Revenue Service (IRS) tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates can largely be reconciled once one uses internal CPS data (which better captures the top of the income distribution than public-use CPS data) and defines the income distribution in the same way. Using internal CPS data for 1967–2006, we closely match the IRS data-based estimates of top income shares reported by Piketty and Saez (2003), with the exception of the share of the top 1 percent of the distribution during 1993–2000. Our results imply that, if inequality has increased substantially since 1993, the increase is confined to income changes for those in the top 1 percent of the distribution.
    JEL: C81 D31
    Date: 2009–09

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