nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2011‒03‒19
four papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Role of Housing Tax Provisions in the 2008 Financial Crisis By Thomas Hemmelgarn; Gaetan Nicodeme; Ernesto Zangari
  2. Fighting Multiple Tax Havens By May Elsayyad; Kai A. Konrad
  3. Fair value accounting and procyclicality: mitigating regulatory and accounting policy differences through regulatory structure reforms and Enforced Self Regulation By Ojo, Marianne
  4. Foreign Investment and the Politics of Export Profits Tax Relief 1956 By Frank Barry;

  1. By: Thomas Hemmelgarn (European Commission); Gaetan Nicodeme (European Commission); Ernesto Zangari (Banca d'Italia)
    Abstract: The 2008 financial crisis is the worst economic crisis since the Great Depression of 1929. It has been characterised by a housing bubble in a context of rapid credit expansion, high risk-taking and exacerbated financial leverage, ending into deleveraging and credit crunch when the bubble burst. This paper discusses the interactions between housing tax provisions and the financial crisis. In particular, it reviews the existing evidence on the links between capital gains taxation of houses, interest mortgage deductibility and characteristics of the crisis.
    Keywords: financial crisis, tax policy, housing, interest deductibility, capital gains
    JEL: E62 G21 H24 H31
    Date: 2011–03
  2. By: May Elsayyad; Kai A. Konrad
    Abstract: This paper develops a competition theory framework that evaluates an important aspect of the OECD's Harmful Tax Practices Initiative against tax havens. We show that the sequential nature of the process is harmful and more costly than a "big bang" multilateral agreement. The sequentiality may even prevent the process from being completed successfully. Closing down a subset of tax havens reduces competition among the havens that remain active. This makes their "tax haven business" more profitable and shifts a larger share of rents to these remaining tax havens, making them more reluctant to give up their "tax haven business". Moreover, the outcome of this process, reducing the number of tax havens, but not eliminating them altogether, may reduce welfare in the OECD.
    Keywords: tax haven, harmful tax practices, bidding for haven inactivation
    JEL: F21 H26 H77 H87
    Date: 2011–01
  3. By: Ojo, Marianne
    Abstract: In what ways can changes to the structure of regulation (as well as other regulatory reforms) mitigate the effects of policies which trigger financial instability? More specifically policies, information asymmetries or externalities which could give rise to bank contagion, systemic/liquidity risks or procyclical effects? Whilst acknowledging that accounting standards play a fundamental role in addressing problems which could contribute to information asymmetries and ultimately systemic risks, this paper also highlights why the type of regulatory structure, clear allocation of responsibilities between regulators, as well as measures aimed at fostering accountability, constitute vital elements which could serve as safeguards in mitigating procyclical effects (as well as other factors) which could trigger financial instability. In achieving this aim, the paper focusses on the rationale for fair value accounting, as well as problematic issues arising from its implementation. The adoption of international accounting standards is considered to have a vital role in contributing to financial stability. This paper will also illustrate how the implementation of accounting standards and policies, in certain instances, have contrasted with Basel Committee initiatives aimed at mitigating procyclicality and facilitating forward looking provisioning. More importantly, the paper will highlight how and why differences between regulatory and accounting policies could (and should) be mitigated.
    Keywords: stability; liquidity risks; systemic risks; pro cyclicality; fair values; information; certainty; regulation; central banks; accountability; macro prudential regulation
    JEL: K2 D8 M4 E3
    Date: 2011–03–05
  4. By: Frank Barry (Institute for International Integration Studies, Trinity College Dublin);
    Abstract: T. K. Whitaker and Seán Lemass are generally credited with effecting the policy shiftfrom protectionism to outward orientation. Ireland’s low corporation tax regime,however, has its origins in the export profits tax relief (EPTR) measures introduced bythe second inter-party government in 1956. EPTR was introduced at the urging of theDepartment of Industry and Commerce in the face of long-standing opposition from Revenue and the Department of Finance. Industry and Commerce at the same time successfully thwarted the desires of the Taoiseach, the Department of Finance and other state agencies to have restrictions on foreign ownership of industry repealed. These apparently contradictory positions were rooted in the historical legacy of protectionism. The inter-party Taoiseach, John A. Costello, downplayed the connection between EPTR and foreign investment in an apparent attempt to deprive Fianna Fáil of an opportunity for controversy. Its introduction hastened the end of Fianna Fáil prevarication on the issue of foreign ownership. The importance of the intense electoral competition of the period is also frequently ignored in accounts of the policy shift. Following sixteen years of unbroken Fianna Fáil rule, the next four general elections brought four changes of government. Along with the depth of the 1950s recession, this forced Fianna Fáil into a comprehensive reexamination of its industrial strategy. The economic thinking of the major political parties co-evolved, and many of the institutional innovations of the period were the result of inter-party government initiatives. The defeat inflicted on Finance by the Department of Industry and Commerce partly motivated Finance’s work on Economic Development, the 1958 publication of which provided political cover for Fianna Fáil’s U-turn on overall economic strategy.
    Keywords: Ireland, FDI, Corporation Tax, Export Profits Tax Relief
    JEL: N14 N43
    Date: 2011–02

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