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on Accounting and Auditing |
| By: | Niels Johannesen (Department of Economics, University of Copenhagen) |
| Abstract: | This paper develops a theoretical model of corporate taxation in the presence of financially integrated multinational firms. Under the assumption that multinational firms at least partly use internal loans to finance foreign investment, we find that the optimal corporate tax rate is positive from the perspective of a small, open economy. This finding contrasts the standard result that the optimal source based capital tax is zero. Intuitively, to the extent that multinational firms finance investment in country i with loans from affiliates in country j, the burden of corporate taxes in the latter country partly fall on investment and thus workers in the former country. This tax exporting mechanism introduces a scope for corporate taxes, which is not present in standard models of international taxation. Accounting for the internal capital markets of multinational firms thus represents a way to resolve the tension between standard theory predicting zero capital taxes and the casual observation that countries tend to employ corporate taxes at fairly high rates. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:kud:epruwp:10-12&r=acc |
| By: | Marie-Laure Breuillé (Université Catholique de Louvain); Skerdilajda Zanaj (CREA, University of Luxembourg) |
| Abstract: | This paper analyzes mergers of regions in a two-tier setting with both horizontal and vertical tax competition. The merger of regions induces three effects on regional and local tax policies, which are transmitted both horizontally and vertically: i) an alleviation of tax competition at the regional level, ii) a rise in the regional tax base, and iii) a larger internalization of tax externalities generated by cities. It is shown that the merger of regions increases regional tax rates while decreasing local tax rates. This Nash equilibrium with mergers is then compared with the Nash equilibrium with coalitions of regions. |
| Keywords: | Mergers, Tax Competition, Fiscal Federalism |
| JEL: | H73 H25 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:10-10&r=acc |
| By: | Vassili Joannides (GDF - Gestion, Droit et Finance - Grenoble Ecole de Management); Nicolas Berland (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX) |
| Abstract: | Our paper addresses what the moral foundations of accounting are, regardless of capitalistic operations, as we are seeking to trace a genealogy of accounting thinking disconnected from coincidence with Capitalism. We demonstrate that the three monotheisms have bared the core of accounting. We purport to explicate how the three monotheisms (Judaism, Christianity divided into Roman Catholicism and Protestantisms, and Islam) have successively revealed the nature of accounting to moralise people's day-to-day conduct. Our approach to the revelation of accounting is informed with practice theory to study how accounting was used in believers' day-today activities and faith management. To this end, we read theological debates on accounting from Rabbinic, Islamic, Catholic and Protestant literatures raised at the time of the Reformation. Our study reveals that, in the four religions, bookkeeping serves as routine and rules to account for daily conduct, its content being contingent upon common understandings (viz. God's identity, capabilities and expectations) and teleoaffective structures (viz. definition of and ways to salvation). Through this paper, we demonstrate that accounting issues have always served as a sub-practice in moral practices and is therefore not necessarily coincidental with economic operations. Ultimately, we contribute to literature on the genesis of accounting, accounting as situated practice and accounting as moral practice.day-today activities and faith management. To this end, we read theological debates on accounting from Rabbinic, Islamic, Catholic and Protestant literatures raised at the time of the Reformation. Our study reveals that, in the four religions, bookkeeping serves as routine and rules to account for daily conduct, its content being contingent upon common understandings (viz. God's identity, capabilities and expectations) and teleoaffective structures (viz. definition of and ways to salvation). Through this paper, we demonstrate that accounting issues have always served as a sub-practice in moral practices and is therefore not necessarily coincidental with economic operations. Ultimately, we contribute to literature on the genesis of accounting, accounting as situated practice and accounting as moral practice. |
| Keywords: | religion, accounting, Catholicism, Protestantism, Judaism, Islam, Control as practice |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00477759_v1&r=acc |
| By: | Leandro Arozamena; Martin Besfamille; Pablo Sanguinetti |
| Abstract: | We examine the problem of a utilitarian government that sets taxes and fines for evaders but cannot commit to any enforcement policy. Given the tax law, the government and taxpayers —some of whom are honest— play a report-audit game that, depending on taxes, fines and audit costs, generates either full evasion and no audits, or partial evasion and random auditing. Anticipating both possibilities, we characterize the optimal tax law. We show that it may be optimal for the government not to fine evaders as a way to commit not to audit. Moreover, social welfare is nonmonotonic in the audit cost. |
| Keywords: | Tax rates, Tax evasion, Enforcement, Audit costs, No commitment, Mixed-strategy equilibrium. |
| JEL: | D82 H26 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:udt:wpecon:2010-10&r=acc |
| By: | Kempf, H.; Rota Graziosi, G. |
| Abstract: | In this paper we extend the standard 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 more 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 risk-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-domination 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 'big-country-higher-tax-rate' rule does not always hold. Classification-JEL: H30, H87, C72. |
| Keywords: | Endogenous timing; tax competition; first/second-mover advantage; strategic complements; stackelberg ; risk dominance. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:299&r=acc |
| By: | S. VAN PARYS; S. JAMES |
| Abstract: | In this paper we first analyze theoretically how the investment climate can affect the impact of corporate taxation on investment in a simple tax competition model where the corporate tax revenues are used to improve the investment climate. We find that an improvement of the investment climate increases the sensitivity of capital to the tax rate if the investment climate is very effective at enhancing the productivity of capital or if the investment climate enhances the productivity of capital much more when the initial investment climate is unattractive than when the initial investment climate is already attractive. As a result, the model calls for the estimation of an investment equation where the tax variable is moderated by an investment climate variable.<br> We estimate such an investment equation using a unique panel dataset of effective corporate tax rates of 80 countries, including countries with an unattractive and countries with an attractive investment climate, for the period 2005-2008. We find two important results. First, a better investment climate increases the sensitivity of FDI to the tax rate. Second, in the worst investment climate countries, FDI reacts not negatively to a rise in the tax rate. These results have important policy implications. For bad investment climate countries it is ineffective to lower the tax rate to compensate for the bad investment climate. Instead, these countries should focus on improving the basic investment climate. |
| Keywords: | tax competition, investment climate, developing countries, Foreign Direct Investment, corporate tax |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:10/676&r=acc |