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on Accounting and Auditing |
| By: | Philipp Doerrenberg (CGS, University of Cologne); Andreas Peichl (IZA, University of Cologne, ISER and CESifo) |
| Abstract: | As the link between tax compliance and tax morale is found to be robust, finding the determinants of tax morale can help to understand and fight tax evasion. In this paper we analyze the effect of progressive taxation on tax morale in a cross-country approach - which has not been investigated before. Our theoretical analysis leads to two testable predictions. First, an individual's tax morale is higher, the more progressive the tax schedule is. Second, the impact of tax progressivity on tax morale is declining in income. In our empirical analysis, we make use of a unique dataset of tax progressivity measures and follow most of the tax morale literature by employing the World Values Survey to measure tax morale. Controlling for a wide range of variables, we confirm both hypotheses in our empirical analysis. |
| Keywords: | Tax Morale, Tax Compliance, Progressivity, Taxation, Redistribution |
| JEL: | H26 H24 D7 D31 |
| Date: | 2010–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:cgr:cgsser:01-06&r=acc |
| By: | James W. Kolari; Ignacio Velez Pareja |
| Abstract: | The value of debt tax shields in foundational corporate valuation models by Nobel Laureates Modigliani and Miller (MM) continues to be a controversial issue that is central to our understanding of corporate finance. This paper argues that a fundamental valuation problem exists in the MM tax models. To overcome this problem, we propose a revision to their now famous tax correction model that yields much smaller tax gains on debt usage. Rather than discounting debt interest payments using a riskless interest rate or unlevered equity rate, due to implausible valuation results implicit in this approach, the levered cost of equity is employed. Assuming no bankruptcy risk and no personal taxes, the proposed revised tax model yields an inverted U-shaped firm value function with an interior optimal capital structure. Analyses are extended to Miller’s personal tax extension of MM’s tax model. Also, implications to corporate capital structure decisions and previous literature are discussed. |
| Date: | 2010–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:col:000162:007702&r=acc |
| By: | Yannick Lemarchand (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272) |
| Abstract: | Accounting tools and procedures played a significant role in the development of the modern State, in the implementation of democracy and in its operation. This paper sets out to illustrate several aspects of this long term relationship by examining the French example. We firstly look at two fundamental improvements which occurred in the public sector accounting, in the early nineteenth century, i.e., the implementation of an efficient tax collecting system, replacing private tax-collecting agencies by a centralised bureaucratic administration, after several unsuccessful attempts during the eighteenth century, and the organisation of the parliamentary control on public expenditure through the adoption of budgetary rules and the definition of control mechanisms. With the Réglement général de la comptabilité publique of 1838, the design of the general framework of French public sector accounting was completed and was to last for over a century. The paper then examines the intervention of the State in the regulation of private sector accounting, in two phases. Only after World War I did State begin to intervene in private accounting practices, because of the creation of an income tax, defining a set of accounting rules with the aim of optimizing income tax performance. At a later date, by the end of the Interwar years, the growing interest for the ideas encompassing a co-ordinated economy and economic planning gradually shaped a further stage in accounting regulation with the adoption of a national accounting chart or the Plan comptable général of 1947. One of the main objectives was to obtain accounting data that were sufficiently homogeneous to be aggregated for the construction of national income statistics and the development of national accounting. These choices contributed to France's economic recovery after World War II. During these 250 years, accounting as a technology of power, knowledge and control, was enrolled in the service of strengthening the State in various respects, and became one of the governance tools of modern democracy This proactive policy contrasts sharply with the abandonment of sovereignty from the European countries regarding accounting regulation, in favour of a non-European private organisation, i.e. the IASB. |
| Keywords: | Accounting and the State ; accounting standardisation ; modern fiscal State ; public sector accounting ; French history |
| Date: | 2010–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00547752_v1&r=acc |
| By: | Stefano Manestra (Banca d'Italia) |
| Abstract: | This study retraces the history of tax compliance in Italy from unification to today. We review the attempts at evaluating the gap between actual and potential tax revenue, from nineteenth-century descriptive statistics up until the formal estimates of recent decades, which distinguish lawful tax erosion from avoidance and evasion. Secondly, we analyze the explanations given and solutions proposed to increase tax compliance, grouping them into five "theses": excessive tax burden, structural deficiencies in specific taxes, inefficiency of tax administration, taxpayers’ reluctance and the complexity of tax laws. We also assess the changing attitudes of taxpayers towards tax and the tax authorities over the same period. The excursus shows that compliance problems are a long-term constant of the Italian tax system, even if their scale has diminished over time, at least in percentage terms. The problems have always originated from a specific group of taxpayers (self-employed workers and sole proprietorships). On the other hand the causes, and therefore the solutions to be taken into consideration, are complex and multifaceted. |
| Keywords: | tax compliance, tax evasion, tax history |
| JEL: | H2 N4 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_81_10&r=acc |
| By: | Ojo, Marianne |
| Abstract: | This paper considers and assesses various explanations attributed as principal factors of the recent Financial Crisis. In particular, it focuses on two principal regulatory tools which constitute the basis of the framework promulgated by recent Basel Committee's initiatives, that is, Basel III. These two regulatory tools being capital and liquidity requirements. Various conclusions have been put forward to explain what triggered the recent Financial Crisis. This paper aims to explain why the Basel Committee's liquidity requirements and present proposals aimed at addressing liquidity risks, still represent a very modest milestone in efforts aimed at addressing challenges in prudential regulation and supervision. Even though problems attributed to capital adequacy requirements are considered by many authorities to have triggered the recent Crisis, the paper will highlight how runs on banks are triggered by liquidity crises and that liquidity risks cannot be isolated from systemic risks. In so doing, it will incorporate the roles assumed by information asymmetries and market based regulation – hence elaborate on how market based regulation could serve to address problems which trigger liquidity risks. Imperfect knowledge being a factor which is contributory to liquidity crises and bank runs, and market based regulation being essential in facilitating disclosure - since the Basel Committee's focus on banks and prudential supervision cannot on its own, address the challenges encountered in the present regulatory environment. Furthermore, it will address measures and proposals which could serve as bases for future regulatory reforms - as well as criticisms and challenges still encountered by recent Basel Committee initiatives. |
| Keywords: | capital; liquidity; Basel III; Basel Committee; lender of last resort; banks; insurance; securities; information asymmetry; market based regulation; bail outs; disclosure; moral hazard; Dodd Frank Act; Financial Crisis |
| JEL: | K2 E52 D8 |
| Date: | 2010–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27627&r=acc |
| By: | Martin Fochmann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Dirk Kiesewetter (Faculty of Economics and Management, JUlius-Maximilians University Würzburg); Abdolkarim Sadrieh (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) |
| Abstract: | Income taxation may not only affect investment behavior by distorting payoffs, it may also have a more subtle, psychological effect, by biasing investors' perceptions of the financial consequences. In a laboratory experiment that allows us to vary the taxation method, while keeping the financial outcomes constant, we find clear evidence that aggregated income taxation (comparable to profit taxation) with complete loss deduction induces a sustained bias towards more risk-taking, while disaggregated income taxation (comparable to a transaction taxation with loss offset) does not. We suggest that this bias may be exploited to increase the volume of private investments by choosing aggregated income taxation, if investors are (too) risk-averse, and to decrease the volume and the risk by choosing disaggregated income taxation, if investors are (too) risk-seeking |
| Keywords: | tax perception, risk-taking behavior, distorting taxation |
| JEL: | C91 D14 H24 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:mag:wpaper:100025&r=acc |
| By: | Borys Grochulski |
| Abstract: | In this paper, we show that a simple, linear capital tax— the kind used in the Ramsey analysis— can be optimal in a Mirrlees economy with private information. We extend the Mirrlees approach to optimal taxation by studying taxes side-by-side with another institution, rather than in isolation. We consider an implementation in which agents use unsecured credit and personal bankruptcy to obtain insurance. Taxes are levied to fund government expenditures. An optimal tax system consists of lump-sum taxes and a simple Ramsey tax on wealth. In Mirrlees private information environments, optimal capital taxes do not have to be complicated. |
| Keywords: | Financial markets ; Financial institutions ; Bankruptcy |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:10-14&r=acc |
| By: | Ooghe, Erwin (Catholic University of Leuven); Peichl, Andreas (IZA) |
| Abstract: | There is clear evidence that fairness plays a role in redistribution. Individuals want to compensate others for their misfortune, while they allow them to enjoy the fruits of their effort. Such fairness considerations have been introduced in political economy and optimal income tax models with a focus on income acquisition. However, actual tax-benefit systems are based on much more information. We introduce fairness in a tax-benefit scheme that is based on several characteristics. The novelty is the introduction of partial control. Each characteristic differs in terms of the degree of control, i.e., the extent to which it can be changed by exerting effort. Two testable predictions result. First, the tax rate on partially controllable characteristics should be lower compared to the tax rate on non-controllable tags. Second, the total effect of non-controllable characteristics on the post-tax outcome should be equal to zero. We estimate implicit tax rates for different characteristics in 26 European countries (using tEU-SILC data) and the US (using CPS data). We find a robust tendency in all countries to compensate more for the uncontrollable composite characteristic (based on sex, age and disability in our study) compared to the partially controllable one (based on family composition, immigration status, unemployment and education level). We also estimate the degree of fairness of tax-benefit schemes in different countries. Only the Continental countries France and Luxembourg pass the fairness test, whereas the Baltic and Anglo-Saxon countries (including the US) perform worst. |
| Keywords: | fairness, redistribution, tax-benefit schemes, tagging, optimal taxation |
| JEL: | D6 H2 I3 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5388&r=acc |
| By: | Hari Luitel (Algoma University); Mehmet Serkan Tosun (Department of Economics, University of Nevada, Reno) |
| Abstract: | Assuming a normal distribution of hazards, Dubin, Graetz, and Wilde (1992) analyze state tax amnesties in the 1980s and conclude that states run amnesties in response to revenue yield motive. Given the increased frequency with which states enacted amnesties during and after the 2001 recession, we investigate if there is a possible shift from revenue yield motive to fiscal stress motive. We find that the normal distribution of hazards assumption along with the multicollinearity problem led prior research to an erroneous conclusion, and that fiscal stress is indeed the main determinant of initial and repeated tax amnesties enacted by states between 1982 and 2005. |
| Keywords: | Tax Amnesty; Fiscal Pressure; Duration Analysis |
| JEL: | H20 H71 H80 C41 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:unr:wpaper:10-009&r=acc |
| By: | Vasia Panousi |
| Abstract: | This paper studies the effects of capital taxation in a dynamic heterogeneous-agent economy with uninsurable entrepreneurial risk. Although it allows for rich general-equilibrium effects and a stationary distribution of wealth, the model is highly tractable. This permits a clear analysis, not only of the steady state, but also of the entire transitional dynamics following any change in tax policies. Unlike either the complete-markets paradigm or Bewley-type models where idiosyncratic risk impacts only labor income, here it is shown that capital taxation may actually stimulate capital accumulation. This possibility emerges because of the general-equilibrium effects of the insurance aspect of capital taxation. In particular, for the preferred calibrated version of the model, when the tax on capital is 25 percent, output per work-hour is 2.2 percent higher than it would have been had the tax rate been zero. Turning to the welfare effects of a reform in capital taxation, it is examined how these effects depend on whether one focuses on the steady state or also takes into account transitional dynamics, as well as how they vary in the cross-section of the population (rich versus poor, entrepreneurs versus non-entrepreneurs). |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2010-56&r=acc |
| By: | Erwin OOGHE; Andreas PEICHL |
| Abstract: | There is clear evidence that fairness plays a role in redistribution. Individuals want to compensate others for their misfortune, while they allow them to enjoy the fruits of their effort. Such fairness considerations have been introduced in political economy and optimal income tax models with a focus on income acquisition. However, actual tax-benefit systems are based on much more information. We introduce fairness in a tax-benefit scheme that is based on several characteristics. The novelty is the introduction of partial control. Each characteristic differs in terms of the degree of control, i.e., the extent to which it can be changed by exerting effort. Two testable predictions result. First, the tax rate on partially controllable characteristics should be lower compared to the tax rate on non- controllable tags. Second, the total effect of non-controllable characteristics on the post-tax outcome should be equal to zero. We estimate implicit tax rates for different characteristics in 26 European countries (using tEU-SILC data) and the US (using CPS data). We find a robust tendency in all countries to compensate more for the uncontrollable composite characteristic (based on sex, age and disability in our study) compared to the partially controllable one (based on family composition, immigration status, unemployment and education level). We also estimate the degree of fairness of tax-benefit schemes in different countries. Only the Continental countries France and Luxembourg pass the fairness test, whereas the Baltic and Anglo-Saxon countries (including the US) perform worst. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces10.32&r=acc |
| By: | Alexei Kireyev |
| Abstract: | The paper models export taxation of a primary commodity in a large country under two hypotheses about the structure of its export market. The first is perfect competition among exporters, where there is an indefinite number of buyers of the local product and at least a partial pass-through of international prices to local producers. The second is an oligopsony, a market structure in some low-income countries where numerous scattered local producers face a few powerful exporters that can influence domestic prices. For both hypotheses, export taxation can be justified on efficiency grounds only for the country that adopts the tax. Designed correctly, a low export tax may be welfare-enhancing for that country but will always be welfare-reducing for its trading partners. The models of export taxation for both hypotheses are calibrated for the illustrative case of cocoa exports from Côte d’Ivoire. |
| Keywords: | Agricultural exports , Cocoa , Commodity prices , Competition , Côte d'Ivoire , Export markets , Export taxes , International trade , Low-income developing countries , Price structures , Taxation , |
| Date: | 2010–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/269&r=acc |