nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2010‒09‒18
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Ohio Employment and International Economic Policy By William R. Melick
  2. Innovative Financing at a Global Level By European Commission
  3. Tax Arbitrage with Risk and Effort Aversion - Swedish Lottery Bonds 1970-1990 By Rydqvist, Kristian
  4. Financial Transaction Tax: Small is Beautiful By Zsolt Darvas; Jakob von Weizsäcker
  5. A new version of Edgeworth's taxation paradox By Robert A. Ritz
  6. Nonlinear effect of corruption, uncertainty, and growth By Ratbek, Ratbek
  7. Measures aimed at enhancing the loss absorbency of regulatory capital at the point of non viability By Ojo, Marianne
  8. Consolidated-Budget Rules and Macroeconomic Stability with Income-Tax and Finance Constraints By Gliksberg, Baruch

  1. By: William R. Melick
    Abstract: This paper analyzes the relationship between international economic policy, in particular the taxation of corporation income, and employment in Ohio. Back-of-the-envelope calculations are used to provide a rough measure of the size of potential employment gains resulting from changes in tax rates and tax treatment.
    Keywords: corporate tax rate, deferral, employment
    Date: 2010–09
  2. By: European Commission
    Abstract: The European Commission services published a staff working document assessing the main sources of innovative financing under discussion. The analysis shows that for some of the instruments a "double dividend" of both raising revenues and improving market efficiency and stability could be reaped, in particular by putting a price on risk-taking in the financial sector and on carbon emissions.
    Keywords: European Union, taxation, financial transaction tax, bank levy, bonus tax, carbon tax, financial institutions
    JEL: G15 G18 G28 H21 H22 H23 H25 H27 H62
    Date: 2010–04
  3. By: Rydqvist, Kristian (Binghamton University)
    Abstract: Swedish lottery bonds are valuable tax shelters before the tax reform of 1991. By trading around the coupon lottery, high-tax investors with capital gains from the stock market shift their tax liability to low-tax investors. The uncertainty of the coupon lottery and the effort of verifying the winning lottery bond numbers are a nuisance to tax traders. We investigate how the Treasury (issuer), market makers (banks), and lottery bond investors respond to those frictions.
    Keywords: Tax arbitrage; Coupon lottery; Lottery number checking; Ex-dividend day; Turn-of-the-year effect; Rationing; Underpricing
    JEL: G12 G18
    Date: 2010–04–15
  4. By: Zsolt Darvas (Bruegel, Hungarian Academy of Sciences, Corvinus University of Budapest); Jakob von Weizsäcker (Thüringer Wirtschaftsministerium, Bruegel)
    Abstract: The case for taxing financial transactions merely to raise more revenues from the financial sector is not particularly strong. Better alternatives to tax the financial sector are likely to be available. However, a tax on financial transactions could be justified in order to limit socially undesirable transactions when more direct means of doing so are unavailable for political or practical reasons. Some financial transactions are indeed likely to do more harm than good, especially when they contribute to the systemic risk of the financial system. However, such a financial transaction tax should be very small, much smaller than the negative externalities in question, because it is a blunt instrument that also drives out socially useful transactions. There is a case for taxing over-the-counter derivative transactions at a somewhat higher rate than exchange-based derivative transactions. More targeted remedies to drive out socially undesirable transactions should be sought in parallel, which would allow, after their implementation, to reduce or even phase out financial transaction taxes.
    Keywords: transaction tax, Tobin tax, financial transactions, global financial crisis, financial regulation
    JEL: H20 D62 G10 F30
    Date: 2010–01–11
  5. By: Robert A. Ritz
    Abstract: Edgworth’s taxation paradox states that an excise tax can decrease the market price of a good. This paper presents a new version of the paradox in which a tax reduces price because it attracts entry of additional firms into the market. The paper also presents two new applications: (i) an emissions tax that leads to an increase in industry emissions (due to entry), and (ii) an interest rate cut by the central bank that reduces lending by commercial banks (due to exit). Basic principles of environmental regulation and monetary policy therefore fail under the conditions of the paradox.
    Keywords: Bank lending, Cost pass-through, Edgeworth's paradox, Environmental regulation, Market structure, Taxation
    JEL: D43 G21 H22 Q50
    Date: 2010
  6. By: Ratbek, Ratbek
    Abstract: Corruption in the public sector is manifested both in collusive and noncollusive forms. Collusive corruption erodes tax compliance and leads to higher tax evasion. Noncollusive corruption stems from abuse of the public position by corrupt public officials to extort bribes from the private agents, thus, reduces their income. Importantly, in both types of interaction with the public sector the private agents are bound to face uncertainty with respect to their disposable incomes, as neither bribes paid nor gains from tax evasion are deterministic. To analyze effects of corruption by accounting for the uncertainty caused by it, a stochastic dynamic growth model is considered. The model also incorporates possibility of nonlinear impact of corruption on production, which implies that corruption deteriorates the growth potential by preventing producers to enter high productive sectors. Most importantly, it is demonstrated that the rise of corruption, by increasing uncertainty, exerts adverse effects on capital accumulation, thus leads to lower growth rates. Hence, this paper resolves the theoretical ambiguity with regards to the overall growth effect of corruption obtained in previous studies.
    Keywords: Corruption; uncertainty; growth
    JEL: D91 E26 H26
    Date: 2010–08–19
  7. By: Ojo, Marianne
    Abstract: The Basel Committee’s recent consultative document on the “Proposal to Ensure the Loss Absorbency of Regulatory Capital at the Point of Non Viability” sets out a proposal aimed at “enhancing the entry criteria of regulatory capital to ensure that all regulatory capital instruments issued by banks are capable of absorbing losses in the event that a bank is unable to support itself in the private market.” As well as demonstrating its support of the Basel Committee’s statement that a public sector injection of capital should not protect investors from absorbing the loss that they would have incurred (had the public sector not chosen to rescue the bank), this paper also highlights identified measures which have been put forward as means of rescuing failing banks – without taxpayer financing. Furthermore, it highlights why the controlled winding down procedure also constitutes a means whereby losses could still be absorbed in the event that a bank is unable to support itself in the private market.
    Keywords: capital; insolvency; financial crises; moral hazard; Basel III; Investor Compensation Schemes Directive; bail outs; equity; liquidity
    JEL: D53 K2 E58
    Date: 2010–09
  8. By: Gliksberg, Baruch
    Abstract: In some Business-Cycle models a fiscal policy that sets income taxes counter cyclically can cause macroeconomic instability by giving rise to multiple equilibria and as a result to fluctuations caused by self fulfilling expectations. This paper shows that consolidated budget rules with endogenous income-tax rates can be stabilizing if they exhibit monetary dominance, where monetary policy manages expectations by implementing an active interest rate rule. This result is robust for plausible degrees of externalities in production. The size of the government, however, plays a key role in the degree of activeness that the monetary authority should exhibit in order to stabilize the economy. If government spending are not too large relative to private consumption, a neutral monetary policy [such that the real rate of interest is constant in and off the steady state] is also stabilizing
    Keywords: Fiscal Policy; Capital-Income Tax; Monetary Policy; Macroeconomic Stabilization; Finance Constraint; Arbitrage Channel; Investment-Based Channel; Consumption-Based Channel;
    JEL: E0 E62 E61
    Date: 2010–07

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