nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2010‒11‒27
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Optimal capital income taxation with tax evasion By D'Andria, Diego
  2. Towards a Less Distortive and More Efficient Tax System in Portugal By Álvaro Pina
  3. Tax Decentralisation and local Government size By Paolo Liberati; Agnese Sacchi
  4. Financial reporting demands in a globalised world: The harmonisation of accounting rules By Hammermeister, Jan H.; Zimmermann, Jochen
  5. Environmental Taxation and Revenue for Development By Agnar Sandmo
  6. What Do We Work For? An Anatomy of Pre- and Post-Tax Earnings Growth By Frederiksen, Anders; Halliday, Timothy; Koch, Alexander K.
  7. How labor market rigidities shape business taxation in a global economy? By Nelly Exbrayat; Carl Gaigné; Stéphane Riou
  8. Reporting Frequency and Substitutable Tasks By Christian Lukas

  1. By: D'Andria, Diego
    Abstract: The paper discusses the applicability of optimal taxation theory to source-based capital incomes when significant tax evasion is observed. Without tax evasion a modified Ramsey Rule may reduce distortions brought by international capital mobility, leading to levying differentiated tax rates in domestic sectors inversely proportioned to observed elasticities in terms of capital mobility. The introduction of tax evasion brings additional complexity. The viability of optimal tax rates à la Ramsey is explored, and additional requirement (namely that tax evasion is either very low or very homogeneous) are shown to be necessary in order to allow policy-makers to obtain the tax rates minimizing total excess burden. Results are also provided to solve the optimal taxation objective when tax evasion is a relevant phenomenon and is not homogeneous throughout domestic sectors. --
    Keywords: optimal taxation,capital income taxation,tax evasion
    JEL: H21 H26
    Date: 2010
  2. By: Álvaro Pina
    Abstract: The process of fiscal consolidation and the need to step up the poor long term economic performance provide an opportunity to implement tax measures to improve efficiency and rebalance the economy. As consolidation progresses, switching taxes from labour to consumption and property offers an avenue to regain eroded competitiveness and to achieve employment gains, especially if the largest reductions of the labour tax wedge are targeted on low-wage workers. As the consumption tax base is particularly large in Portugal, such a shift could allow a sizeable cut in the tax wedge while still raising revenue, if needed. Productivity and welfare can be increased by simplifying the tax system, thus reducing the high compliance costs it imposes, especially on small and medium sized firms. Also, the tax system could be more environment-friendly by using it to further address transport-sector externalities, which are of particular concern in metropolitan areas. At the same time, the current tight budgetary pressures call for increased efficiency in tax collection. There is ample scope for base broadening through reduced tax expenditures in the major direct and indirect taxes, as well as in property taxation. This Working Paper relates to the 2010 OECD Economic Survey of Portugal (<P>Vers un système fiscal plus efficient et moins générateur de distorsions au Portugal<BR>Le processus d’assainissement des finances publiques et la nécessité de renforcer la mauvaise performance économique à long terme permettent de mettre en oeuvre des mesures fiscales pour améliorer l’efficacité et remettre l’économie sur une trajectoire de croissance. Au fur et à mesure que la consolidation fiscale progresse, le transfert de l’imposition des revenus du travail vers les impôts sur la consommation et sur le patrimoine offre un moyen de regagner la compétitivité perdue et de créer des emplois, surtout si les réductions du coin fiscal sur le travail se concentrent sur les titulaires de bas salaires. L’assiette des impôts sur la consommation étant particulièrement large au Portugal, ce transfert pourrait induire une baisse considérable du coin fiscal tout en augmentant les recettes, le cas échéant. La productivité et le bien-être peuvent être améliorés en simplifiant le système fiscal, réduisant ainsi les coûts de discipline élevés, en particulier vis-à-vis des petites et moyennes entreprises. De même, le système fiscal pourrait être plus favorable à l’environnement en s’attaquant aux externalités générées par les transports, qui sont particulièrement préoccupantes en zone urbaine. Parallèlement, les pressions budgétaires considérables exigent des gains d’efficience dans le recouvrement des impôts. Il existe de nombreuses possibilités d’élargir l’assiette en réduisant les dépenses fiscales pour les principaux impôts directs et indirects, ainsi que pour la fiscalité immobilière. Ce document de travail se rapporte à l’Étude économique du Portugal de 2010 ( surveys/portugal).
    Keywords: Portugal, property tax, labour tax wedge, VAT, personal income tax, corporate income tax, tax expenditures, tax and growth, environmental taxes, social security contributions, tax compliance costs, Portugal, impôt sur le revenu, dépense fiscale, TVA, cotisations de sécurité sociale, coûts liés au respect de la réglementation, croissance de l’impôt, impôt sur les bénéfices des sociétés, impôts sur le patrimoine, impôt sur l’environnement, coin fiscal sur le travail
    JEL: H20 H21 H23 H24 H25 H26 J32 J38
    Date: 2010–11–10
  3. By: Paolo Liberati; Agnese Sacchi
    Abstract: The aim of this paper is to re-examine the relationship between fiscal federalism and the size of local governments. Traditionally, the empirical studies have focused on the different accountability power of grants and local taxes, concluding that the former encourages the growth and the latter contributes to contain local public spending. Yet, the existing literature is more silent about the possibility that different types of tax autonomy may still have differential impacts on the expansion of the local public sector. The paper addresses this issue by introducing a new testable hypothesis - the “Tax Separation Hypothesis” (TSH) - according to which tax decentralisation organised on tax bases used only by local governments would favour most the containment of local public expenditures, while that organised on tax base sharing (i.e. piggybacking mechanisms) is not expected to have a significant impact on the local government size. Using an unbalanced panel data set of OECD countries, we adopt the novel approach of disentangling the impact of local taxes - on income, property, and goods and services - on the size of the local public sector. In particular, property taxes only - mostly based on a “tax separation” scheme - seem to have a negative impact on the size of local government. Instead, both income taxes and general taxes on goods and services – often shared with central governments – have uncertain impacts on the size of local governments (and more frequently positive). We conclude that tax decentralisation is a necessary condition to contain local public expenditures, yet it is not sufficient, as a tax separation scheme would in fact be required.
    Keywords: Fiscal decentralisation; Tax sharing; Tax separation; Property taxes; Local government size.
    JEL: H71 H77 H2
    Date: 2010–06
  4. By: Hammermeister, Jan H.; Zimmermann, Jochen
    Abstract: OECD accounting regimes have significantly changed over the last three decades. Financial reporting rules for (public) companies have become more similar, and the ways in which accounting rules are set and enforced have converged. This paper explores to what extent (financial) globalisation drives convergence of financial reporting systems. We analyse globalisation developments and changes in accounting regulation in six large OECD countries: Canada, France, Germany, Great Britain, Japan and the USA. We identify changes in the demand and supply patters of accounting regulation, and present empirical evidence for the concurrence of financial globalisation and accounting harmonisation. A newly developed financial globalisation index and changes in accounting regulation are jointly analysed. We find that the analysed countries have experienced distinct waves of globalisation since the beginning of the 1970s and that these waves coincide with a delayed accounting harmonisation. -- Die Rechnungslegungssysteme der OECD-Staaten haben sich in den letzten drei Jahrzehnten erheblich verändert. Für kapitalmarktorientierte Unternehmen sind die Rechnungslegungsregeln ähnlicher geworden, und auch die Wege zur Entwicklung und Durchsetzung von Rechnungslegungsnormen haben sich angeglichen. Dieser Beitrag untersucht, in welchem Ausmaß die (finanzielle) Globalisierung eine Konvergenz von Rechnungslegungssystemen vorantreibt. Analysiert werden Globalisierungsentwicklungen und Veränderungen von Rechnungslegungsregulierung in den sechs großen OECD-Staaten: Deutschland, Frankreich, Großbritannien, Japan, Kanada und den USA. Muster im Angebots- und Nachfrageverhalten bezüglich der Regulierung von Rechnungslegung werden untersucht, und dabei wird empirische Evidenz für einen Zusammenfallen von finanzieller Globalisierung und Harmonisierung der Rechnungslegung gefunden. Für die untersuchten Länder können seit Beginn der 1970er Jahre verschiedene Wellen der Globalisierung festgestellt werden, die, zeitlich versetzt, mit einer Harmonisierung von Rechnungslegung korrelieren.
    Date: 2010
  5. By: Agnar Sandmo
    Abstract: This paper considers the role of global environmental taxes both as instruments for improving the global environment and as a source of revenue for funding economic development. It reviews the general case for environmental taxes and the particular issues that arise for the adoption of such taxes in an international setting without a single jurisdiction. It also discusses the possibilities for political acceptance of such taxes when tax revenue is linked to the goal of economic development. The revenue potential of global environmental taxes is evaluated with special reference to a global carbon tax. It is found that this tax alone has the potential to raise sufficient revenue to finance the United Nations’ Millennium Development Goals. [Discussion Paper No. 2003/86]
    Keywords: environment, taxation, carbon tax, consumption
    Date: 2010
  6. By: Frederiksen, Anders (Aarhus School of Business); Halliday, Timothy (University of Hawaii at Manoa); Koch, Alexander K. (University of Aarhus)
    Abstract: Promotions and cross-firm mobility provide substantial gains in earnings – a well established finding based on gross income data. Yet, what matters for incentives is how much an individual can consume or save after taxation. We show that net and gross income growth patterns may differ substantially when a progressive tax system allows for deduction opportunities. Exploiting unique matched employer-employee data with information on tax payments and employee mobility, we find that gross income gains from promotions and cross-firm mobility do not translate into significantly higher net income growth, because employees adjust their tax-shielded consumption and savings (in particular, deductible private pension contributions and mortgage-financed housing) to maintain constant net income growth.
    Keywords: earnings growth, promotions, mobility, taxable income, dynamic panel data models, matched employer-employee data
    JEL: M51 J6 C33 H31
    Date: 2010–11
  7. By: Nelly Exbrayat (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Carl Gaigné (INRA-ESR - Unité d'économie et de sociologie rurales - INRA); Stéphane Riou (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: We investigate the impact of trade liberalization upon the taxation of capital within a context of labor market rigidities. Using a model of trade and location, we show that labor market imperfections not only strengthen tax competition but also affect the relationship between trade integration and tax policies. Capital taxation follows a J-shaped relationship with trade costs when labor markets are flexible, whereas it may increase with falling trade costs in the presence of trade unions acting as Stackelberg leaders or playing simultaneously with governments. In addition, we analyze the outcome which arises from di§erences between the various countries' labor market institutions. Trade liberalization reduces the international differences in wage and capital taxation, making the unionized country more attractive.
    Keywords: Tax competition; unions; capital mobility; trade integration
    Date: 2010
  8. By: Christian Lukas (Department of Economics, University of Konstanz, Germany)
    Abstract: The optimal reporting frequency is an important issue in accounting. In many production settings, substitution effects across periods occur. This paper shows that the optimal reporting frequency depends on the strength of the substitution effect and on the information content of performance signals. For a subset of parameter combinations - the low-chance scenario - infrequent reporting is always efficient; for other parameter combinations – the high-chance scenario - infrequent reporting is efficient as long as first-period signals show high informativeness (and substitution effects are strong). Limited commitment by the principal does not influence results.
    Keywords: dynamic agency, intertemporal aggregation, reporting frequency, performance measurement, substitubtable tasks, commitment
    JEL: D86 M12 M41 M52
    Date: 2010–11–16

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