nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2010‒08‒21
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. A Theory of Taxation and Incorporation By Christian Keuschnigg; Peter Egger; Hannes Winner
  2. Itemised Deductions: A Device to Reduce Tax Evasion By Piolatto, A.
  3. Juridical and financial considerations on the public re capitalisation and rescue of financial institutions during periods of financial crises (Part I) By Ojo, Marianne; Rodríguez-Miguez, Jose
  4. Moving to Goods and Services Tax in India: Impact on India’s Growth and International Trade By Rajesh Chadha
  5. Coordinated Tax-Tariff Reforms, Informality, and Welfare Distribution By Ligthart, J.E.; Meijden, G.C. van der

  1. By: Christian Keuschnigg; Peter Egger; Hannes Winner
    Abstract: This paper provides a theory of incorporation and taxation that emphasizes the role of the corporate legal form in facilitating access to external capital and the potential advantages of limited liability. Incorporation relaxes financing constraints and makes corporations larger than comparable non-corporate firms. For the same reason, a tax on corporations imposes a smaller first order welfare loss than a tax on non-corporate firms. Shifting the tax burden from non-corporate to corporate firms raises welfare, justifying some double taxation of corporate profits under a classical system. We compare the role of taxes with other institutional reforms and discuss how the theoretical results of the paper can be tested empirically.
    Keywords: Incorporation, corporate tax, external capital, limited liability
    JEL: H25 H73 F23 C21
    Date: 2010–08
  2. By: Piolatto, A. (Tilburg University, Center for Economic Research)
    Abstract: Direct incentives and punishments are the most common instruments to fight tax evasion. The theoretical literature disregarded indirect schemes, such as itemised deductions, in which an agent has an interest in that other agents declare their revenue. Itemised deductions provide an incentive for consumers to declare their purchases, and this forces sellers to do the same. I show that, for any level of taxation, it is possible to increase tax proceeds by choosing the proper level of itemised deduction; the cost for the government on the consumers’ side is more than compensated by the extra proceeds on the sellers’ side.
    Keywords: Tax evasion;itemised deductions;substitutes goods;quantity competition
    JEL: H00 H20 H26 H30
    Date: 2010
  3. 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 or own funds1 (ordinary or common shares) - balancing the “real value” with the “market value” within a crisis context. This paper will also consider how to transform the Crisis into an opportunity in order to minimise tax burdens to taxpayers – as well as making financial markets more efficient. Furthermore, whether the Commission and Member States have applied the methodology (the determination of the price of equity – as stated in the Annex to the Re capitalisation Communication) in determining the price of equity with respect to the capital of banks acquired by Member States, will 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; State aid; re capitalisation; MEIP; guarantees; Troubled Asset Relief Program (TARP); fundamentally sound institutions; rescues; restructuring; recovery
    JEL: D53 K2 E5 E44
    Date: 2010–07–26
  4. By: Rajesh Chadha
    Abstract: The differential multiple tax regime across sectors of production leads to distortions in allocation of resources thus introducing inefficiencies in the sectors of domestic production. With regard to India’s exports, this leads to lack of international competitiveness of the sectors which would have been relatively efficient under distortion- free indirect tax regime. Further, there is lack of full offsets of taxes loaded on to the fob export prices. Efficient allocation of productive resources and providing full tax offsets is expected to result in gains for GDP, returns to the factors of production and exports of the economy. Implementation of a comprehensive goods and services tax (GST) is expected, ceteris paribus, to provide gains in India’s GDP somewhere within a range of 0.9 to 1.7 per cent. It is expected that the real returns to the factors of production would go up. [Working Paper No. 103]
    Keywords: multiple tax regime, production, allocation, inefficiencies, international competitiveness, GDP
    Date: 2010
  5. By: Ligthart, J.E.; Meijden, G.C. van der (Tilburg University, Center for Economic Research)
    Abstract: The paper studies the revenue, efficiency, and distributional implications of a simple strategy of offsetting tariff reductions with increases in destination-based consumption taxes so as to leave consumer prices unchanged. We employ a dynamic micro-founded macroeconomic model of a small open developing economy, which features an informal sector that cannot be taxed, a formal agricultural sector, and an import-substitution sector. The reform strategy increases government revenue, imports, exports, and the informal sector. In contrast to Emran and Stiglitz (2005), who ignore the dynamic effects of taxes and tariffs on factor markets, we find an efficiency gain, which is unevenly distributed. Existing generations benefit more than future generations, who (depending on pre-existing tax and tariff rates and the informal sector size) even may become worse off.
    Keywords: Tariff reform;consumption tax reform;informal sector;home production;transitional dynamics;overlapping generations;second-best outcome
    JEL: E26 F11 F13 H20 H26
    Date: 2010

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