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on Accounting and Auditing |
| By: | De Borger B.; Wuyts B. |
| Abstract: | In Europe, the preferential tax treatment of company cars implies that many employees receive a company car as part of their compensation package. In this paper, we consider a model in which wages and the decision whether or not to provide a company car are the result of direct negotiation between employer and employee. Using this framework, we theoretically and numerically study first- and second-best optimal tax policies on labour and transport markets, focusing on the role of the tax treatment of company cars. We show that higher labour taxes and a more favourable tax treatment of company cars raise the fraction employees that receives a company car; congestion and congestion tolls reduce it. More importantly, we find that earlier models that ignored the preferential tax treatment of company cars may have substantially underestimated optimal congestion tolls in Europe. The numerical illustration, calibrated using Belgian data, suggests that about one third of the optimal congestion toll is due to the current tax treatment of company cars. We further find that eliminating the preferential tax treatment of company cars is an imperfect -- but easy to implement -- substitute for currently unavailable congestion tolls: it yields about half the welfare gain attainable through optimal congestion taxes. Finally, the favourable tax treatment of company cars justifies large public transport subsidies; the numerical results are consistent with zero public transport fares. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2010017&r=acc |
| By: | Ramkishen Rajan |
| Abstract: | The turmoil that has characterised the global financial markets since the 1990s, and particularly the crisis in East Asia, has generated a great deal of support for proposals to add some frictions to the wheels of international finance, as part of overall reforms to the global financial architecture. With this in view, this paper explores the economic effects of and rationale for imposing levies on capital flows in general, and a Tobin tax in particular. It is argued that the primary aim of such a levy ought to be to act as a measure to prevent for a crisis from building up (i.e. a domestic boom fuelled by short-term capital inflows), rather than as a means of countering or providing breathing space for necessary adjustments once a crisis erupts (or threatens to do so). The Tobin tax needs to be fairly universal in its coverage, failing which there would be a migration of foreign exchange flows to tax havens. Admittedly, the political will to arrive at an international agreement on such a levy is far from assured. However, to the extent that developing economies are most impacted by the vagaries of the financial markets, each may find it in its best interest to unilaterally examine the efficacy of imposing Chilean-type measures of restraining capital flows, as appropriate and aggressive steps are taken to enhance the soundness and transparency of the banking and financial systems. [Working Paper No. 7] |
| Keywords: | global, financial markets, international finance, architecture, capital inflows, soundness, transparency, banking, financial systems |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2686&r=acc |
| By: | Bart P.M. Joosen |
| Abstract: | - |
| Keywords: | - |
| JEL: | F33 K33 |
| Date: | 2010–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:hlj:hljwrp:06-2009&r=acc |
| By: | Mathias Hanten |
| Abstract: | - |
| Keywords: | - |
| JEL: | F33 K33 |
| Date: | 2010–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:hlj:hljwrp:07-2009&r=acc |
| By: | Donald P. Morgan; Stavros Peristiani; Vanessa Savino |
| Abstract: | We investigate whether the “stress test,” the extraordinary examination of the nineteen largest U.S. bank holding companies conducted by federal bank supervisors in 2009, produced the information demanded by the market. Using standard event study techniques, we find that the market had largely deciphered on its own which banks would have capital gaps before the stress test results were revealed, but that the market was informed by the size of the gap; given our proxy for the expected gap, banks with larger capital gaps experienced more negative abnormal returns. Our findings suggest that the stress test helped quell the financial panic by producing vital information about banks. Our findings also contribute to the academic literature on bank opacity and the value of government monitoring of banks. |
| Keywords: | Bank capital ; Bank examination ; Bank holding companies |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:460&r=acc |
| By: | Ojo, Marianne; Rodríguez-Miguez, Jose |
| Abstract: | As well as a consideration of why the lender of last resort facility should be used for emergency situations and systemically relevant institutions in particular, an interesting point which will be considered in this paper is the comparison between the European Central Bank (ECB) Recommendation and its application by the Commission in the Re capitalisation Communication, specifically with its Annex, where the Commission explains how it determines the price of equity (ordinary or common shares) - balancing the “real value” with the “market value” within a crisis context. Whether the Commission and Member States have applied this methodology in determining the price of equity with respect to the capital of banks acquired by Member States, will also be addressed. Such consideration could provide a vital key to determining the real value of State Aid and the best possible price for which capital could be sold. Given the scale of government intervention and State rescues which occurred during the recent crisis – as well as the prominence accorded to measures aimed at preventing and limiting distortions of competition, calls have been made for competition authorities to take on more formidable roles in designing and implementing exit strategies. In order to foster competition as much as possible, it is proposed that ”governments should provide financial institutions with incentives to prevent them from depending on government support once the economy begins to recover.” |
| Keywords: | Financial Crisis; re capitalisation; guarantees; Troubled Asset Relief Program (TARP); fundamentally sound institutions; rescues. |
| JEL: | K2 G2 E58 D4 |
| Date: | 2010–07–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24047&r=acc |
| By: | Inci Ötker; Jiri Podpiera |
| Abstract: | This paper attempts to identify the fundamental variables that drive the credit default swaps during the initial phase of distress in selected European Large Complex Financial Institutions (LCFIs). It uses yearly data over 2004 - 08 for 29 European LCFIs. The results from a dynamic panel data estimator show that LCFIs’ business models, earnings potential, and economic uncertainty (represented by market expectations about the future risks of a particular LCFI and market views on prospects for economic growth) are among the most significant determinants of credit risk. The findings of the paper are broadly consistent with those of the literature on bank failure, where the determinants of the latter include the entire CAMELS structure - that is, Capital Adequacy, Asset Quality, Management Quality, Earnings Potential, Liquidity, and Sensitivity to Market Risk. By establishing a link between the financial and market fundamentals of LCFIs and their CDS spreads, the paper offers a potential tool for fundamentals-based vulnerability and early warning system for LCFIs. |
| Date: | 2010–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/153&r=acc |
| By: | Aureo de Paula (Department of Economics,University of Pennsylvania); Jose A. Scheinkman (Department of Economics, Princeton University) |
| Abstract: | We test implications of a simple equilibrium model of informality using a survey of 48,000+ small firms in Brazil. In the model, agent's ability to manage production differ and informal firms face a higher cost of capital and limitation on size, although these informal firms avoid tax payments. As a result, informal firms are managed by less able entrepreneurs, are smaller, and employ a lower capital-labor ratio. The model predicts that the interaction of an index of observable inputs to entrepreneurial ability and formality is positively correlated with firm size, which we verify in the data. Using the model, we estimate that informal firms in our dataset faced at least 1.3 times the cost of capital of formal firms. |
| Keywords: | Informal Sector, Tax Avoidance, Brazil |
| JEL: | H2 H3 K4 |
| Date: | 2009–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:10-024&r=acc |