nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2011‒02‒19
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The tax system and the financial crisis By Vieri Ceriani; Stefano Manestra; Giacomo Ricotti; Alessandra Sanelli; Ernesto Zangari
  2. Auditor and audit committee independence in India By Jayati Sarkar; Subrata Sarkar
  3. Taxation on Rural Sector: Tax Burden, Land Value and Property Right. By Horacio L. P. Piffano
  4. ¿Es posible un Acuerdo Fiscal Federal Sustentable sin una Reforma del Sistema Tributario Federal? By Horacio L. P. Piffano
  5. The Pure Logic of Accounting: A Critique of the Fair Value Revolution By Yuri Biondi
  6. The missing wealth of nations: Evidence from Switzerland, 1914-2010 By Gabriel Zucman
  7. Higher Taxes on Multinationals Would Hurt US Workers and Exports By Gary Clyde Hufbauer; Theodore H. Moran

  1. By: Vieri Ceriani (Banca d'Italia); Stefano Manestra (Banca d'Italia); Giacomo Ricotti (Banca d'Italia); Alessandra Sanelli (Banca d'Italia); Ernesto Zangari (Banca d'Italia)
    Abstract: This paper investigates the effects of the tax system on the economic factors that triggered the financial crisis. We examine three cases in which the tax regime interacted with these factors, reinforcing them. First, we focus on the taxation of residential building: while the importance of capital gains taxes is disputed, the deductibility of mortgage interest may have contributed to the financial crisis by creating some of the raw materials for the securitization industry. Second, a narrow perspective on the tax treatment, together with specific provisions, may have fostered performance-based remuneration of managers, resulting in overemphasis of short-term profitability and incentive to excessive risk-taking. Third, the securitization process, which played a key role in the outbreak of the financial crisis, was accompanied by opportunities for tax arbitrage and reduction of the overall tax wedge paid by investors, through offset of incomes that are ordinarily taxed at different rates; a de facto exemption of CDS premiums received by non-residents supplemented the tax arbitrage.
    Keywords: taxation, financial crisis, housing market, stock options, securitization, credit default swaps
    JEL: H2 G1
    Date: 2011–01
  2. By: Jayati Sarkar (Indira Gandhi Institute of Development Research); Subrata Sarkar (Indira Gandhi Institute of Development Research)
    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.
    Keywords: Corporate governance, India, auditor independence, audit committee independence
    JEL: G34 G38
    Date: 2010–10
  3. By: Horacio L. P. Piffano
    Abstract: The paper analyzes tax burden on rural sector and its implication on property right of land. First, tax burden on land property and rural activities, and its incidence on land values are analyzed; next, the author tries to advance an economic foundation theory for evaluating a legal quantitative limit for the determination that judicial intervention had established, or may establish in the future, to define or differentiate tax burden as confiscatory and, therefore, violating property right.
    Keywords: Taxation on rural sector, tax burden, land value, property right, confiscation.
    JEL: H2
    Date: 2010–04
  4. By: Horacio L. P. Piffano
    Abstract: The paper explores the feasibility of a new agreement on the Fiscal and Financial Federal Coordination System in Argentina and seeks to corroborate the hypothesis that this would not be feasible and sustainable in the long run without a Reform of the Federal Tax System, in particular, a reform that involves the removal of tax on exports (Retenciones) of rural sector production. This would enable a greater degree of development of regional economies and a consequent greater sub-national “tax-room” compatible with a genuine federal system of government.
    Keywords: Fiscal Federalism, Tax Power Assignment. Regional Economies. Rural Sector. Tax on Exports. Consolidated Tax Burden. Confiscation. Fiscal and Financial Federal Agreement.
    JEL: H2 H7 R5
    Date: 2010–08
  5. By: Yuri Biondi (PREG - Pole de recherche en économie et gestion - CNRS : UMR7176 - Polytechnique - X)
    Abstract: When international accounting standards were renamed to become international financial reporting standards, this seemed to imply that accounting no longer needed to exist, but rather had to be reconsidered as a part of financial communication and advertising. Does traditional accountability no longer matter? Betrayed investors and globalized stakeholders would dissent. A difference of nature continues to exist between fair values disclosed by managers and certified by auditors, and the actual performance generated by the enterprise entity through time, space, and interaction. In a world shaped by complex organizations facing unfolding changes, hazard and limited knowledge, the quest for fundamental principles of accounting is not academic. Accounting principles constitute a primary way that the creation and allocation of business incomes is governed; that is, fairly managed and regulated in the public interest, having respect to “other people interests.” This article adopts a dualistic posture that opposes the accounting conceptual frameworks based on fair value (market basis) and historical cost and revenue (process basis). The fundamental premises about the underlying economics of the enterprise entity are discussed, including the representation of the business and the concepts of asset and liability. References are made to the case of accounting for intangibles, and to the distinction between equities and liabilities. The cost and revenue accounting perspective is then defended in terms of accountability, but also from the informational viewpoint: historical accounting information plays a special role as a lighthouse in the dynamic and strategic setting of the Share Exchange. In particular, two refinements of the historical cost (and revenue) accounting model are suggested. The first one regards the treatment of earned revenues from continuing operations, and the second, the recognition of shareholders' equity interest computed on the actual funds provided in the past, coupled with the distinction between shareholders' equity and entity equity.
    Keywords: accounting theory; international financial reporting standards (IFRS); intangibles; conceptual framework; accounting principles and rules; accounting standards; marked-to-market; fair value; marked-to-models; accounting regulation
    Date: 2011
  6. By: Gabriel Zucman (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper draws on direct evidence from Swiss banks and on systematic inconsistencies in international accounts across countries to document the level of unrecorded wealth in tax havens, its nature and its evolution. I find that 8% of global household net financial wealth is held in tax havens, of which one third in Switzerland. The bulk of offshore assets are invested in equities, in particular mutual fund shares. For this reason, 20% of all cross-border equities have no identifiable owner in international statistics across the world. Taking into account tax havens alters dramatically the picture of global imbalances: with minimal assumptions, it is possible to turn the world's second largest debtor, the eurozone, into a net creditor. With stronger assumptions, the largest debtor, the U.S., can be made a balanced economy. Europeans are richer than we think, because a significant part of their wealth has historically been held where domestic national accountants and tax authorities cannot see it.
    Keywords: tax havens ; external assets ; wealth distribution ; tax evasion
    Date: 2011–02
  7. By: Gary Clyde Hufbauer (Peterson Institute for International Economics); Theodore H. Moran (Peterson Institute for International Economics)
    Abstract: President Barack Obama declared in his State of the Union address--echoing the rhetoric during his days as presidential candidate--that "it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America." Do US multinationals deserve tax punishment because they "ship jobs overseas"? Hufbauer and Moran cite studies that compare US firms engaged in outward investment with similar firms that stay at home. They conclude that outward bound firms consistently export more from the United States than the home firms. If US tax policy were changed so as to hinder outward investment by US firms, evidence indicates US export performance would be weaker, not stronger. These tax changes would not lead to more investment at home either. The best bottom line for American workers--and the American economy as a whole--is to keep the United States a favorable location for American multinationals to do business. The plants of US multinationals are the most productive in the United States, most technology-intensive, and pay the highest wages. In contrast to most countries that maintain simple territorial tax systems, either de jure or de facto, the United States subjects its multinationals to worldwide taxation. The United States should align its taxation of multinationals to the territorial norms of foreign competitors--from France and Germany to Brazil, India, and China. It should adopt its own version of territorial taxation and allow US-based multinationals to repatriate dividends from their foreign subsidiaries at a flat rate of 5 percent, with no foreign tax credit. This was successfully tried for 2005 in the American Jobs Creation Act of 2004 (the AJCA). The result was a gush of repatriated income, around $300 billion, and revenue that the US Treasury would never have seen. In 2010, the Congress should lay aside the administration's proposals for punishing US multinationals with higher taxes and instead make the AJCA tax of 5 percent on repatriated dividends a permanent part of the tax code.
    Date: 2010–05

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