nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2011‒01‒23
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Investment impact of tax loss treatment: Empirical insights from a panel of multinationals By Dreßler, Daniel; Overesch, Michael
  2. HMRC's Management of the UK Tax System: the Boundaries of Legitimate Discretion By Judith Freedman; John Vella
  3. Estimating the distributional effects of mortgage interest tax relief in Europe By Manos Matsaganis
  4. An Instrumental Variables Approach to Estimating Tax Revenue Elasticities: Evidence from Sub-Saharan Africa By Markus Brückner
  5. Evasão …scal sob estruturas comportamentais By Gabriela Pantoja; Rodrigo Peñaloza
  6. Private sector balance, financial markets, and U.S. cycle: A SVAR analysis By Casadio, Paolo; Paradiso, Antonio

  1. By: Dreßler, Daniel; Overesch, Michael
    Abstract: We analyze the impact of tax loss treatment on the size and structure of multinational investments. Basically, two effects of tax loss treatment can be expected. First, firms make their investment decisions in the face of potential future losses. Then, the various types of conceivable loss offset provisions affect investment decisions. Secondly, existing loss carryforwards resulting from losses in the past affect the tax rate-elasticity of current investment decisions. The empirical analysis is based on data of German multinationals. The data is taken from the MiDi database provided by the German Central Bank (Deutsche Bundesbank). Regarding the tax loss treatment of potential future losses, our regression results suggest that a short carryforward time limit lowers investments in industries having a high probability to make losses. Moreover, we find significant positive effects of group loss offsetting provisions on the size of investments and on the number of subsidiaries they are structured across. Concerning the effects of existing losses carried forward, we find a reduced tax rate elasticity of investments for companies shielded by existing losses. --
    Keywords: Corporate Taxation,Loss Treatment,Group Taxation,Multinational Firms,Empirical Analysis
    JEL: F23 H25 H32
    Date: 2010
  2. By: Judith Freedman (University of Oxford); John Vella (Oxford University Centre for Business Taxation)
    Date: 2010
  3. By: Manos Matsaganis (Athens University of Economics and Business)
    Abstract: This paper attempts to contribute to the analysis of mortgage interest tax relief from the perspective of the economics of social policy. It begins with a brief discussion of �fiscal welfare�, highlighting key contributions within this particular intellectual tradition. It then contrasts this largely critical approach to the standard, more neutral, treatment of mortgage interest tax relief in the housing literature. Finally, the paper draws on both approaches to present on-going research on the distributional effects of mortgage interest tax relief in Europe.
    Date: 2011–01–10
  4. By: Markus Brückner (School of Economics, University of Adelaide)
    Abstract: Consistent estimation of the tax revenue elasticity is complicated by the endogenous response of GDP to changes in tax rates and measurement error in national accounts statistics. This paper exploits the significant response of real GDP growth of Sub-Saharan African countries to exogenous international commodity price and rainfall shocks to construct instrumental variables estimates of the tax revenue elasticity parameter. IV estimates yield that a 1 percent increase in GDP increases tax revenues by up to 2.5 percent. IV estimates therefore point to large responses in the tax revenues collected by Sub-Saharan African governments.
    Keywords: tax revenues, growth, instrumental variables
    JEL: E62 H20 H60 O55
    Date: 2011–01
  5. By: Gabriela Pantoja (Departamento de Economia (Department of Economics) Faculdade de Economia, Administração, Contabilidade e Ciência da Informação e Documentação (FACE) (Faculty of Economics, Administration, Accounting and Information Science) Universidade de Brasília); Rodrigo Peñaloza (Departamento de Economia (Department of Economics) Faculdade de Economia, Administração, Contabilidade e Ciência da Informação e Documentação (FACE) (Faculty of Economics, Administration, Accounting and Information Science) Universidade de Brasília)
    Abstract: We study the strategic interactions between the …scal authority and the taxpayer regarding tax evasion and auditing. We …t this interaction into a Bayesian game and introduce the concept of behavioral consistency, which helps reducing the number of available strategies and models the stylized fact according to which the choice to evade is subject to behavioral patterns.
    Keywords: tax evasion, Bayesian equilibrium, behavioral consistency
    JEL: H26 D82 C72
    Date: 2011–01
  6. By: Casadio, Paolo; Paradiso, Antonio
    Abstract: Purpose – Considering the sectoral balance approach of Godley, and focusing only on the two main components of the private sector balance for the U.S. economy (household and non-financial corporate balance), we investigate the relationship between these two sectors, the financial variables, and economic cycle. In particular, we consider all these relationships endogenously. Design/methodology/approach – We estimate a structural VAR model between household and (non-financial) corporate financial balances, financial markets, and economic cycle and we perform an impulse response analysis. All the variables are expressed as cyclical components applying the Hodrick-Prescott filter. Findings - The main result is that: (1) household and corporate balances react to financial markets in the way we expected and discussed; (2) the economic cycle influences the two financial balances; (3) the corporate balance has a positive impact on the cycle; (4) the economic cycle and financial balances influence the financial variables. In particular, point (3) shows that the corporate balance is a leading component of the cycle as suggested by Casadio and Paradiso (2009) and accords with Minsky’s theory of financial instability. Research limitations/implications – The analysis does not include the foreign sector (current-account balance). Originality/value – Our contribution is an important step forward with respect to the two main contributions in literature which use this approach: the Levy Institute macroeconomic team and Goldman Sachs. Methodologically their models are based on some assumptions (such as exogeneity or market clearing price mechanism for the financial markets) which we overcome considering all the relationships studied in an endogenous manner.
    Keywords: Household financial balance; Corporate financial balance; Business cycle; Financial markets; SVAR
    JEL: C32 E12 E20
    Date: 2010–12–18

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