nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2010‒11‒13
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Personal Income Tax Gap for Business Income Earners In New York State: From the Real Estate Tax Perspective By Niu, Yongzhi; Cohen, Roger
  2. Corporate financial policy and investor taxation in Austria: An empirical investigation By Haring, Magdalena; Niemann, Rainer
  3. "The Economic Recession in 2008 and Corporate Accounting Behavior" (in Japanese) By Takashi Obinata
  4. The gains from preferential tax regimes reconsidered By Carl Gaigné; Ian Wooton
  5. Investor protection and disclosure. Quantitative evidence By Marek Gruszczynski
  6. A Flat Rate Financial Transaction Tax to replace all taxes? By Simon J Thorpe
  7. Auditor and Audit Committee Independence in India By Jayati Sarkar; Subrata Sarkar

  1. By: Niu, Yongzhi; Cohen, Roger
    Abstract: Based on the recognition that the evasion of real estate tax is much more difficult than the evasion of personal income tax and the assumption that, in general, taxpayers with similar income would consume a similar amount of housing and pay a similar amount of real estate tax, we build a model to estimate the personal income tax gap for business income earners in New York State. More specifically, we compare reported Federal adjusted gross income (AGI) between two groups of taxpayers: wage earners and business income earners. With the assumption that the wage income earners fully report their income, we find that there is a huge reporting gap of AGI for the business income earners in New York State as a whole. The income gap is $67.8 billion in 2007, which accounts for 26.2 percent of the total AGI the business income earners would have reported if they had been totally compliant with tax laws. If we apply the median of the New York State personal income tax rate, 5.25 percent, to the income gap, the personal income tax gap for the business income earners in the State in 2007 reaches $3.6 billion.
    Keywords: tax gap; PIT; personal Income Tax; business income; wage income; real estate tax; underreporting;
    JEL: H20 H24 H26
    Date: 2010
  2. By: Haring, Magdalena; Niemann, Rainer
    Abstract: The paper analyzes the impact of in investor capital gains taxation on corporate leverage of Austrian corporations. We conduct our analyses for a unique sample of Austrian firms, including a large part of non-listed corporations. By means of regression analyses we show that the capital gains tax rate, the fraction of taxable investors of a corporation as well as the dividend payout ratio are significant determinants of the financing decisions of Austrian firms. Legal status, listing and corporate profitability also affect the debt ratio of corporations in Austria. Additionally we show that family-owned companies behave differently from other corporations, indicating the importance of research on family businesses. Sensitivity analyses accounting for different calculations of the effective tax rate on capital gains show that our obtained results are robust. --
    Date: 2010
  3. By: Takashi Obinata (Faculty of Economics, University of Tokyo)
    Abstract: This paper investigates on the effects of economic recession in 2008 after the "financial crisis" with Firm - Level Data (non-financial sector) from the Corporate Enterprise Annually Statistics - from 1994 to 2008. The purpose of this research is to investigate the impact of the shock on the firms' earnings and their adoptive accounting behavior. Four major findings of this paper are as follows. First, the recession in 2008 caused to the decline of firms' operating revenues and operating earnings. Moreover, the valuation losses of holding securities hit against their poor business performance. However, financing activities were not the point at the issue for most firms. Originally, not financial, but business performance of loss reporting firms in 2008 was lower than the other firms. Because "winners" disappeared in 2008, the performance of Japanese firms so seriously declined on the whole. Second, the persistence of earnings greatly dropped in 2008, because the more firms reported losses and the more firms experienced the earnings decrease. I detect the evidence that, under controlling the change of earnings signs between profits and losses, the persistence of earnings is declining during 15 years. Third, though the accounting standards for the financial instruments and for the impairments of fixed assets gave an effect on the "cherry-picking" sales behavior of the investments, i.e. financial assets and holding securities, I find that "cherry-picking" sales still remain. By "cherry-picking", big companies smoothed the net income when earnings before tax, special and extraordinary items were relatively lower. However, they abandoned the income smoothing in 2008, in the face of the rapid and great decline of performance. Fourth, the time series behavior of earnings components, the persistence of earnings, and income smoothing behavior are different among the capital size classes. All of those varieties would not necessarily be brought by the actual and real differences in corporate management. The fact that we don't know the accounting standards, which are used in the middle and small capital size firms, is a new and very important problem for Corporate Enterprise Statistics, collecting the data of financial statements from firms belong to the various capital classes and combining those data without modification.
    Date: 2010–10
  4. By: Carl Gaigné; Ian Wooton
    Abstract: The EU policy against harmful tax competition aims at eliminating tax policies targeted at attracting the internationally mobile tax base. We construct an imperfectly competitive model of costly trade between two countries. In setting their corporate taxes, governments non-cooperatively decide whether to discriminate between internationally mobile and immobile firms. We find the Nash equilibrium tax regimes. When trade costs are high countries impose a uniform tax on all firms while nations will discriminate between mobile and immobile firms when costs are low. At some trade costs, fiscal competition results in tax discrimination despite uniform taxation being socially preferable.
    Keywords: preferential tax regimes; tax competition; imperfect competition; trade costs
    JEL: H87 F12
    Date: 2010
  5. By: Marek Gruszczynski (Warsaw School of Economics)
    Abstract: The paper surveys research in the area of measuring the level of accounting disclosure and of exploring various issues associated with accounting disclosure. In particular, the ques-tion of how the disclosure is connected to investor protection is investigated. This issue is shown in the context of the countries’ legal systems and in the relation to corporate govern-ance. New results presented in the paper include composition and application of Polish Corpo-rate Disclosure Index (PCDI). PCDI has been evaluated for 48 companies listed on Warsaw Stock Exchange for the years 2005, 2006 and 2007. Subsequently PCDI was used as the re-gressor variable in a number of models explaining various investor protection measures. The outcome of this research is that PCDI is significantly associated with the variables represent-ing investor protection. Higher values of PCDI are linked with the lower variability of stock prices, with the better the category of auditor as well as with the better management and the better perception of the company by the market.
    Keywords: accounting disclosure, corporate disclosure, investor protection, accounting re-search
    JEL: C10 G30 M41
    Date: 2010–11–07
  6. By: Simon J Thorpe (CERCO - Centre de recherche cerveau et cognition - CNRS : UMR5549 - Université Paul Sabatier - Toulouse III)
    Abstract: In this paper I propose a very radical reform of the taxation system, in which a single flat rate financial transaction tax (FTT) is used to replace the vast majority of existing taxes (including VAT, income tax, taxes on profits...). Existing economic data indicates that a flat rate FTT of 1% would generate far more revenue that is currently generated by all existing taxes, and would allow governments to rapidly repay debts and restore programs of public expenditure as well as allowing resources to be allocated to globally important challenges such as third world development, climate change and health issues.
    Keywords: Economy, Finacial Crisis, Financial Transaction Tax
    Date: 2010–10–29
  7. By: Jayati Sarkar; Subrata Sarkar
    Abstract: This article reviews the regulations and governance reforms carried out in India with respect to auditor and audit committee independence. In doing so it critically compares them with the regulations existing in the US. This is followed by a discussion of the existing research on the effectiveness of audit committees and audit independence in corporate governance. Recent trends in audit committee and auditor characteristics for a sample of large listed companies in the Indian corporate sector are then discussed. The article concludes by suggesting some governance reforms that may be considered to further strengthen auditor independence and the functioning of audit committees in India. [WP-2010-020]
    Keywords: Corporate governance, India, auditor independence, audit committee independence
    Date: 2010

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