nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2011‒02‒05
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Deficit-Reducing Potential of a Financial Speculation Tax By Dean Baker
  2. Tax evasion, information reporting, and the regressive bias hypothesis By Pinje, Jori Veng; Boserup, Simon Halphen
  3. Are household surveys like tax forms: evidence from income underreporting of the self-employed By Erik Hurst; Geng Li; Benjamin Pugsley
  4. The disciplinary power of accounting-based regulation: the case of building societies, circa 1960 By Batiz-Lazo, Bernardo; Noguchi, Masayoshi
  5. Why are tax incentives increasingly used to promote private R&D? By Adão Carvalho
  6. Charitable giving in the German welfare state: Fiscal incentives and crowding out By Bönke, Timm; Massarrat-Mashhadi, Nima; Sielaff, Christian

  1. By: Dean Baker
    Abstract: While a number of commissions and organizations around Washington have produced plans for reducing the projected deficit in the decades ahead, most have not included a financial speculation tax (FST) in the mix. This seems peculiar since an FST has several features that could make it attractive as a revenue source.
    Keywords: taxes, speculation, transactions, Wall Street
    JEL: G G1 G18 G2 G24 G28 G3 G38
    Date: 2011–01
  2. By: Pinje, Jori Veng; Boserup, Simon Halphen
    Abstract: A robust prediction from the tax evasion literature is that optimal auditing induces a regressive bias in e¤ective tax rates compared to statutory rates. If correct, this will have important distributional consequences. Nevertheless, the regressive bias hypothesis has never been tested empirically. Using a unique data set, we provide evidence in favor of the regressive bias prediction but only when controlling for the tax agencys use of third-party information in predicting true incomes. In aggregate data, the regressive bias vanishes because of the systematic use of third-party information. These results are obtained both in simple reduced-form regressions and in a data-calibrated state-of-the-art model.
    Keywords: tax evasion; tax enforcement; information reporting; auditing
    JEL: D82 K42 H26
    Date: 2011–01–26
  3. By: Erik Hurst; Geng Li; Benjamin Pugsley
    Abstract: There is a large literature showing that the self-employed underreport their income to tax authorities. In this paper, we quantify the extent to which the self-employed also systematically underreport their income in U.S. household surveys. To do so, we use the Engel curve describing the relationship between income and expenditures of wage and salary workers to infer the actual income, and thus the reporting gap, of the self-employed based on their reported expenditures. We find that the self-employed underreport their income by about 30 percent. This result is remarkably robust across data sources and alternative model specifications. Failing to account for such income underreporting leads to biased conclusions. We document this bias in existing measures of earnings differentials, wealth differentials, precautionary savings, lifecycle earnings profiles, and earnings variation across MSAs. Our results show that it is naive for researchers to take it for granted that individuals will provide unbiased information to household surveys given their demonstrated tendency of providing distorted reports of the same information to other administrative sources.
    Date: 2011
  4. By: Batiz-Lazo, Bernardo; Noguchi, Masayoshi
    Abstract: This paper examines how accounting–based regulation was introduced through the House Purchase and Housing Act, 1959 (HPHA59) and Building Societies Act, 1960 (BSA60). It also tells how it was put into practice by the Registrar of Friendly Societies (RFS). The discussion is framed by the so called ‘disciplinary perspective’ of accounting as represented by Hoskin and Macve (1986; 1988; 1994a; 1994b; 1996; 2000). Fieldwork documents cases of intervention by the RFS under new powers granted by BSA60. These new powers were used to discipline targeted societies or those revealing inadequate use of their funds and thus, observed important deviations from specified accounting-based criteria which was generally recognized as financially sound within the industry. As a result we provide evidence of how accounting-based regulation affected the operation of the societies. This evidence amends other studies claiming that managers of British financial intermediaries disregarded accounting information in their operation and strategic plans (or that they incorporated such criteria until the 1990s).
    Keywords: accounting-based regulation; House Purchase and Housing Act; 1959 (HPHA59); Building Societies Act; 1960 (BSA60); Chief Registrar of Friendly Societies (CRFS); the Building Societies Association (Association); disciplinary power; reserve ratio
    JEL: N8 M41 N2
    Date: 2011–01
  5. By: Adão Carvalho (University of Évora and CEFAGE)
    Abstract: Although not new, tax incentives have known major changes over recent years and it is becoming an increasingly important instrument in the policy mix to stimulate private R&D in many countries around the world. The OECD reports three major trends: The implementation of R&D tax incentives schemes by a growing number of OECD and non- OECD countries; A steady substitution of direct funding schemes for tax incentives schemes to stimulate business R&D; The many changes to tax incentives schemes most countries have done to increase the levels of generosity and attractiveness. This paper attempts to explain the motives behind these trends in R&D policy to stimulate private R&D and takes a multi-level approach as the issue involves political, strategic and economic considerations. The reasons behind the growing preference for tax incentives go much beyond any possible advantage these policies might have over direct measures, and are also the consequence of a political change in the EU R&D policy after the Lisbon Strategy and the subsequent actions to stimulate R&D expenditures, a change in the economic rationale of public support of private R&D in face of the insufficiency of market failures to justify that public intervention in a new context characterised by a public determination to increase the amount of business R&D expenditures, and the growing competition between countries for international R&D investment.
    Keywords: Tax incentives; Business R&D; R&D policy.
    JEL: O38 H25 O31
    Date: 2011
  6. By: Bönke, Timm; Massarrat-Mashhadi, Nima; Sielaff, Christian
    Abstract: Governmental activities in welfare states influence private charitable giving predominantly in two ways: (1) government spending on the provision of public goods may cause crowding out of private charitable contributions; and (2) tax incentives may boost private charitable giving. For a rich sample of German income tax returns, we estimate elasticities of charitable giving regarding tax incentives, income and governmental spending. Using censored quantile regression, we are able to derive results for different points of the underlying distribution of charitable giving. Assuming a world with impure altruism (Andreoni 1990), we find evidence for impurely altruistic giving behaviour. Taking crowding out into account, tax deductibility of charitable giving suffices to foster private giving to offset foregone tax revenues. --
    Keywords: charitable giving,crowding out,price and income elasticity,censored quantile regression,income tax return data
    JEL: C31 H31 H53
    Date: 2010
  7. By: Javier Díaz-Giménez (IESE Business School); Josep Pijoan-Mas (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: In this article we quantify the aggregate, distributional and welfare consequences of investment expensing and progressivity in flat-tax reforms of the United Sates economy. We find that investment expensing as in the Hall and Rabushka type of reform brings about sizable output gains and non-trivial increase in after-tax income inequality. But we also find that it results in large aggregate welfare gains in steady-state. Two additional flat-tax reforms with full investment expensing and varying degrees of progressivity reveal that the distributional role of the tax-exemption in the labor income tax is limited. But we also find that the progressivity of the reforms matters for welfare: economies with more progressive consumption-based flat-taxes are good for the very poor and are ultimately preferred by a Benthamite social planner because they allow households to do more consumption and leisure smoothing. Our findings suggest that moving towards a progressive consumption-based flat tax scheme could achieve the goals of raising government income, stimulating the economy and providing a safety net for the households that have been hit the hardest by the recession.
    Keywords: Flat-tax reforms, progressivity, efficiency, inequality.
    JEL: D31 E62 H23
    Date: 2011–01

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