nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2010‒06‒18
nine papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Tax Morale and Compliance Behavior: First Evidence on a Causal Link By Martin Halla
  2. Optimal Taxes on Wealth and Consumption in the Presence of Tax Evasion By Johann K. Brunner; Susanne Pech; Paul Eckerstorfer
  3. An applied analysis of ACE and CBIT reforms in the EU.. By Mooij, Ruud A., de; Devereux, Michael P.
  4. Tax Evasion and Tax Avoidance in Developing Countries: The Role of International Profit Shifting By Clemens Fuest; Nadine Riedel
  5. Corporate tax effects on the quality and quantity of FDI By Johannes Becker; Clemens Fuest; Nadine Riedel
  6. Corporate taxation and the size of new firms: Evidence from Europe. By Da Rin, M.; Di Giacomo, M.; Sembenelli, A.
  7. And the tax winner is ... A note on endogenous timing in the commodity taxation race. By Hubert Kempf; Grégoire Rota-Graziosi
  8. Framework for the Development of Financial Literacy Baseline Surveys: A First International Comparative Analysis By Elaine Kempson
  9. Endogenizing leadership in the tax competition race. By Hubert Kempf; Grégoire Rota-Graziosi

  1. By: Martin Halla
    Abstract: Recent literature on tax evasion emphasizes the importance of moral considerations to explain compliance behavior. As a consequence scholars aim to identify factors that shape this so-called tax morale. However, the causal link between tax morale and actual compliance behavior is not established yet. Exploiting exogenous variation in tax morale - given by the inherited part of tax morale of American-born from their ancestors country of origin - our instrumental variable analysis provides first evidence on a causal effect of tax morale on the size of the underground production.
    Keywords: Tax morale, tax evasion, tax compliance, underground production
    JEL: A13 O17 H26 Z13 C81
    Date: 2010–04
  2. By: Johann K. Brunner; Susanne Pech; Paul Eckerstorfer
    Abstract: This article incorporates tax evasion into an optimum taxation framework with individuals differing in earning abilities and initial wealth. We find that despite the possibility of its evasion a tax on initial wealth should supplement the optimal nonlinear income tax, given a positive correlation between initial wealth and earning abilities. Further, even if income and initial wealth are taxed optimally, it is still desirable to levy a tax on commodities, though it can be evaded as well. Thus, our result provides a rationale for a comprehensive tax system. Optimal tax rates on commodities differ in general, however for the special case of a uniform evasion technology it turns out that equal rates are optimal if preferences are homothetic and weakly separable.
    Keywords: Optimal Taxation, Tax Evasion
    JEL: D82 H21 H24 H26
    Date: 2010–03
  3. By: Mooij, Ruud A., de; Devereux, Michael P.
    Abstract: We assess the quantitative impact of two reforms to corporation tax, which would eliminate the differential treatment of debt and equity: the allowance for corporate equity (ACE) and the comprehensive business income tax (CBIT).We explore the impact of these reforms on various decision margins, using an applied general equilibrium model for the EU calibrated with recent empirical estimates of elasticities. The results suggest that, if governments adjust statutory corporate tax rates to balance their budget, profit shifting and discrete location render CBIT more attractive for most individual European countries. European coordination makes a joint ACE more, and a joint CBIT less efficient. A combination of ACE and CBIT is always welfare improving.
    JEL: D58 H52
    Date: 2010
  4. By: Clemens Fuest (Oxford University Centre for Business Taxation); Nadine Riedel (Oxford University Centre for Business Taxation)
    Abstract: In the debate on the impact of illicit capital flows on developing countries, the view is widespread that profit shifting to low tax jurisdictions undermines the ability of developing countries to raise tax revenue. While the shifting of income out of developed countries is a widely debated issue, empirical evidence on the magnitude of the problem and on the factors driving income shifting is scarce. This paper reviews the literature on tax avoidance and evasion through border crossing income shifting out of developing countries. Moreover, we discuss methods and available datasets which can be used to gain new insights into the problem of corporate income shifting. We argue that results of many existing studies on tax avoidance and evasion in developing countries are difficult to interpret, mainly because the measurement concepts used have a number of drawbacks. We discuss some alternative methods and datasets and present some empirical evidence which supports the view that profit shifting out of many developing countries and into tax havens takes place.
    Date: 2010
  5. By: Johannes Becker (Max Planck Institute for Intellectual Property, Competition and Tax Law); Clemens Fuest (Oxford University Centre for Business Taxation); Nadine Riedel (Oxford University Centre for Business Taxation)
    Abstract: This paper measures the relative importance of quality and quantity effects of corporate taxation on foreign direct investment. Quantity is affected if corporate taxes reduce the equilibrium stock of foreign capital in a given country. Quality effects arise if taxes decrease the extent to which investment contributes to the corporate tax base and the capital intensity of production. Depending on the sign of the quality effects, the detrimental welfare effects of corporate taxation are either mitigated or aggravated. We derive a number of hypotheses how corporate tax changes may affect the quality of investment. Our hypotheses are then tested using data from a large sample of European multinationals. With regard to corporate tax effects on the corporate tax base, we find that quality effects account for up to fourty per cent of the total effect. With regard to corporate tax effects on labour income, our results suggest that quality effects mitigate the negative quantity effect by nearly sixty percent (as corporate taxes strongly increase the labor intensity of production). An important implication is that governments should not exclusively care about the size of inbound FDI flows but also about their specific characteristics, i.e. their quality.
    Keywords: Corporate Taxation, Foreign Direct Investment, Multinational Firms
    JEL: H25 F23
    Date: 2010
  6. By: Da Rin, M. (Tilburg University); Di Giacomo, M.; Sembenelli, A.
    Date: 2010
  7. By: Hubert Kempf (Centre d'Economie de la Sorbonne - Paris School of Economics et Banque de France); Grégoire Rota-Graziosi (CERDI, Université d'Auvergne)
    Abstract: This note investigates the endogenous choice of leadership in commodity tax competition. We apply an endogenous timing game, where jurisdictions commit themselves to lead or to follow, to the Kanbur and Keen (1993) model. We show that the Subgame Pefect Nash Equilibria (SPNE) correspond to the two Stackelberg situations, yielding to a coordination issue. Selecting an equilibrium by means of the risk-dominance criterion, we prove that the smaller country has to lead. If asymmetry among countries is sufficient Pareto-dominance reinforces risk-dominance in selecting the same SPE. We deduce two important results for the literature of tax competition : when countries differ sufficiently by their size, the "big-country-higher-tax" rule does not hold anymore ; when countries are close in size, tax harmonization through a unique tax rate among countries occurs without any international agreement.
    Keywords: Commitment, commodity tax competition, strategic complements, Stackelberg Equilibrium, Pareto dominance, risk dominance.
    JEL: C72 H30 H87
    Date: 2010–05
  8. By: Elaine Kempson
    Abstract: There is growing concern, across a wide range of countries, about the levels of financial capability of consumers. A large number of initiatives are therefore being developed to address this issue; and countries are increasingly rolling out national strategies on financial capability. To do this effectively requires evidence on the areas where financial capability in the population is low and an identification of the extent to which these should be addressed by financial education and/or consumer protection measures. Yet there is remarkably little robust information in this area and none that is comparable across countries. This report is aimed at informing the work of the OECD International Network on Financial Education (INFE) in this field, by 1) elaborating a set of draft good practice guidelines for the design of national financial literacy surveys and; 2) proposing guidelines for the design of a core set of good practice questions for embedding within any national surveys aimed at measuring financial literacy levels.<P>Cadre pour le développement des connaissances financières à un niveau international : Première étude comparative internationale<BR>De nombreux pays s‘inquiètent de plus en plus des niveaux de compétences financières des consommateurs. Un grand nombre d‘initiatives sont mises en place pour augmenter les niveaux de connaissances financières et les pays se sont attelés à ces enjeux et ont commencé à développer des stratégies nationales en matière de capacité financière. Pour que cette démarche soit efficace, il faut recueillir des données dans les domaines où les connaissances financière de la population sont faibles et identifier jusqu‘à quel point des mesures en matière d‘éducation financière et/ou de protection des consommateurs peuvent aborder ces difficultés. Or, il existe extrêmement peu d‘information solide dans ce domaine et elle ne s‘avère pas comparable entre les pays. Le but de ce rapport est d‘informer sur les travaux que mène le réseau international sur l‘éducation financière de l‘OCDE (INFE) sur cette question à travers 1) l‘élaboration d‘un projet de bonnes pratiques pour la conception d‘enquêtes nationales sur les niveaux de capacité financière ; et 2) la proposition de lignes directrices pour l‘établissement d‘un ensemble de questions fondamentales de base à intégrer dans toute enquête nationale visant à mesurer le niveau de compétence financière des consommateurs, s‘appuyant sur des bonnes pratiques en la matière.
    Keywords: budgets, spending, saving, financial education, financial planning, financial literacy, financial capability, financial literacy survey, consumer protection, budget, dépenses, épargne, éducation financière, planification financière, connaissance financière, capacité financière, enquête des connaissances financières, protection des consommateurs
    JEL: D14 D18 D91 D92 I22
    Date: 2009–12
  9. By: Hubert Kempf (Centre d'Economie de la Sorbonne - Paris School of Economics et Banque de France); Grégoire Rota-Graziosi (CERDI, Université d'Auvergne)
    Abstract: In this paper, we extend the stansard approach of horizontal tax competition by endogenizing the timing of decisions made by the competing jurisdictions. Following the literature on the endogenous timing in duopoly games, we consider a pre-play stage, where jurisdictions commit themselves to move early or late, i.e. to fix their tax rate at a first or second stage. We highlight that at least one jurisdiction experiments a second-mover advantage. We show that the Subgame Perfect Equilibria (SPEs) correspond to the two Stackelberg situations yielding to a coordination problem. In order to solve this issue, we consider a quadratic specification of the production function, and we use two criteria of selection. Pareto-dominance and riskk-dominance. We emphasize that at the safer equilibrium the less productive or smaller jurisdiction leads and hence loses the second-mover advantage. If asymmetry among jurisdictions is sufficient, Pareto-dominance reinforces risk-dominance in selecting the same SPE. Three results may be deduced from our analysis : (i) the downward pressure on tax rates is less severe than predicted ; (ii) the smaller jurisdiction leads ; (iii) the &quotbig-country-higher-tax-rate" rule does not always hold.
    Keywords: Endogenous timing, tax competition, first/second-mover advantage, strategic complements, Stackelberg, Risk dominance.
    JEL: H30 H87 C72
    Date: 2010–05

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