nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2010‒06‒04
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Incentives for Tax Planning By Armstrong, Christopher S.; Blouin, Jennifer L.; Larcker, David F.
  2. IFRS for SMEs: Eine Alternative für den Einzelabschluss aus Sicht des deutschen Mittelstandes? By Henselmann, Klaus; Klein, Martin; Wiese, Maren
  3. Company Car Taxation By Copenhagen Economics
  4. Tax Morale, Tax Evasion, and the Shadow Economy By Gebhard Kirchgässner
  5. Taxing risk and the optimal regulation of financial institutions By Narayana Kocherlakota
  6. The Poverty of States: Do State Tax Policies Affect State Labor Productivity? By McPhail, Joseph E.; Orazem, Peter; Singh, Rajesh
  7. Can banks circumvent minimum capital requirements? The case of mortgage portfolios under Basel II By Christopher Henderson; Julapa Jagtiani
  8. The Norwegian Shareholder Tax Reconsidered By Södersten, Jan; Lindhe, Tobias

  1. By: Armstrong, Christopher S. (University of Pennsylvania); Blouin, Jennifer L. (University of Pennsylvania); Larcker, David F. (Stanford University)
    Abstract: Recent research argues that differences in the structure of top executive compensation plans and/or corporate culture explain cross-sectional variation in tax avoidance. However, this research does not link tax planning to the incentives of the specific executive managing the tax function in the firm. We use a proprietary data set with detailed executive compensation to examine the relation between the incentives of the tax director and the book-tax gap, financial and cash effective tax rates, and measures of tax aggressiveness. We find that the incentives of the tax director exhibit a strong negative relation with the financial effective tax rate, but little relation with the other tax attributes. We interpret these results as indicating that tax directors are provided with incentives to generate a favorable impact to the financial statements.
    JEL: H25 M41 M52
    Date: 2009–06
  2. By: Henselmann, Klaus; Klein, Martin; Wiese, Maren
    Abstract: -- The objective of the IFRS for SMEs is to provide SMEs an attractive accounting alternative according to international standards. The paper analyses the differences compared to the German-GAAP and highlights the consequences for medium-sized entities in Germany.
    Keywords: Accounting,full IFRS,IFRS,IFRS for SMEs,non-listed companies,small and medium-sized entities (SMEs)
    JEL: G18 G38 K22 M41 M42
    Date: 2010
  3. By: Copenhagen Economics
    Abstract: This study presents new, nearly EU wide estimates of the level of subsidies to company cars. In addition, it also provides some preliminary rough illustrations of the possible effects of such subsidies on economic welfare and environment and discusses the policy implications.
    Keywords: taxation, car taxation, subsidies, environment
    JEL: H22 H23 H25 H31 H32 H54
    Date: 2010–06
  4. By: Gebhard Kirchgässner
    Abstract: Under which conditions is moral justification of taxation possible? This question does not only interest philosophers and economists from a scientific point of view, but can have considerable practical relevance as well because the willingness of citizens to pay taxes may depend upon whether they consider taxation to be morally justified or not. We first consider theoretical arguments on the role of tax morale, and when tax evasion might be considered as justified by citizens or not. Then we ask how tax morale can be measured. Next, we discuss the role of tax morale for the shadow economy, before determinants of tax morale and empirical results for the impact of tax morale on tax compliance are discussed. For a high tax morale, institutional and cultural factors are at least as important as economic incentives.
    Keywords: Tax morale, tax evasion, principles of taxation, trust, direct democracy, federalism
    JEL: H20 H26
    Date: 2010–05
  5. By: Narayana Kocherlakota
    Abstract: Knowing that bailouts are inevitable because governments will rescue firms whose collapse may cause systemic failure, financial institutions fail to internalize risks their investments impose on society, thereby creating a “risk externality.” This paper proposes that just as taxes are imposed to deal with pollution externalities, taxes can also address risk externalities. ; The size of the optimal tax depends on risk-related attributes and may be difficult for supervisors to calculate and implement. A market-based method can estimate its appropriate magnitude. For a particular financial institution, the government should sell “rescue bonds” paying a variable coupon linked to the size of the bailouts or other government assistance received by the institution or its owners. Coupon prices will reflect the market’s judgment of an institution’s risk profile and can therefore be used to set the tax. ; A well-designed tax system can entirely eliminate the risk externality generated by inevitable government bailouts.
    Keywords: Financial crises ; Taxation ; Risk ; Regulation
    Date: 2010
  6. By: McPhail, Joseph E.; Orazem, Peter; Singh, Rajesh
    Abstract: There are substantial differences in output per worker across states that persist over time.  This study demonstrates that differences in state taxation of capital income, capital ownership, and consumption can explain why differences in labor productivity can persist.  First, state tax policies persist with little change in the taxes imposed over time.  Second, sales, property, and capital income taxes will all lower equilibrium labor productivity in the context of a neoclassical growth model.  The most negative effects occur at the highest marginal tax rates.  These theoretical predictions are supported, using data on state marginal tax rates and output per worker over the 1977-2004 sample period.  Over that period, the mix of state tax policies has led to a reduction in labor productivity averaging almost 20% per year.  The implied adverse effect of tax distortions on labor productivity across states is substantial, varying from -11.8% in Nevada to -27.6% in Iowa.  State tax policies have become increasingly damaging to labor productivity over time as states have increased their marginal tax rates.  On the other hand, government expenditure policies explain none of the variation in labor productivity across states or time.  
    Keywords: states; tax efficiency; Property tax; sales tax; corporate tax; income tax; capital gains tax; Solow growth model; labor productivity
    JEL: H2 H3 H7
    Date: 2010–05–26
  7. By: Christopher Henderson; Julapa Jagtiani
    Abstract: The recent mortgage crisis has resulted in several bank failures as the number of mortgage defaults increased. The current Basel I capital framework does not require banks to hold sufficient amounts of capital to support their mortgage lending activities. The new Basel II capital rules are intended to correct this problem. However, Basel II models could become too complex and too costly to implement, often resulting in a trade-off between complexity and model accuracy. In addition, the variation of the model, particularly how mortgage portfolios are segmented, could have a significant impact on the default and loss estimated and, thus, could affect the amount of capital that banks are required to hold. This paper finds that the calculated Basel II capital varies considerably across the default prediction model and segmentation schemes, thus providing banks with an incentive to choose an approach that results in the least required capital for them. The authors also find that a more granular segmentation model produces smaller required capital, regardless of the economic environment. In addition, while borrowers' credit risk factors are consistently superior, economic factors have also played a role in mortgage default during the financial crisis.
    Keywords: Capital ; Banks and banking ; Basel capital accord
    Date: 2010
  8. By: Södersten, Jan (Uppsala Center for Fiscal Studies); Lindhe, Tobias (Uppsala Center for Fiscal Studies)
    Abstract: In an article in International Tax and Public Finance, Peter Birch Sørensen (2005) gives an in-depth account of the new Norwegian Shareholder Tax, which allows the shareholders a deduction for an imputed risk-free rate of return. Sørensen’s positive evaluation appears as reasonable for a closed economy where the deduction for the imputed return is capitalized into the market prices of corporate shares. We show that in a small open economy where no capitalization occurs, the Norwegian shareholder tax is likely to leave the distortions caused by the corporate income tax unaffected, and to add new distortions to shareholders’ portfolio decisions.
    Keywords: Tax neutrality; open economy; shareholder taxation; corporate-personal tax integration; small firms
    JEL: H24 H25
    Date: 2010–05–25

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