nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2011‒04‒16
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Procedurally Fair Taxation By Herings P. Jean-Jacques; Predtetchinski Arkadi
  2. Tax Evasion, Welfare Fraud, and "The Broken Windows" Effect: An Experiment in Belgium, France and the Netherlands By Lefèbvre, Mathieu; Pestieau, Pierre; Riedl, Arno; Villeval, Marie Claire
  3. Tax Evasion, Technology Shocks, and the Cyclicality of Government Revenues By Jordi Caballé; Judith Panadés
  4. Capping Individual Tax Expenditure Benefits By Martin Feldstein; Daniel Feenberg; Maya MacGuineas
  5. Measuring true sales and underreporting with matched firm-level survey and tax-office data By Zhou, Fujin; Oostendorp, Remco
  6. Investments in Intangible Assets and Australia’s Productivity Growth — Sectoral Estimates By Barnes, Paula
  7. Fiscal Zoning and Sales Taxes: Do Higher Sales Taxes Lead to More Retailing and Less Manufacturing? By Daria Burnes; David Neumark; Michelle J. White

  1. By: Herings P. Jean-Jacques; Predtetchinski Arkadi (METEOR)
    Abstract: We study the implications of procedural fairness on income taxation. We formulateprocedural fairness as a particular non-cooperative bargaining game and examine thestationary subgame perfect equilibria of the game. The equilibrium outcome is called tax equilibrium and is shown to be unique. The procedurally fair tax rate is defined as the tax rate that results in the limit of tax equilibria when the probability that negotiations break down converges to zero. The procedurally fair tax rate is shown to be unique. We also provide a characterization of the procedurally fair tax rate that involves the probability mass of below average income citizens and a particular measure of the citizens'' boldness. This characterization is then used to show that in a number of interesting cases the procedurally fair tax rate equals the probability mass of below average income citizens.
    Keywords: public economics ;
    Date: 2011
  2. By: Lefèbvre, Mathieu (CREPP, Université de Liège); Pestieau, Pierre (CREPP, Université de Liège); Riedl, Arno (Maastricht University); Villeval, Marie Claire (CNRS, GATE)
    Abstract: In a series of experiments conducted in Belgium (Wallonia and Flanders), France and the Netherlands, we compare behavior regarding tax evasion and welfare dodging, with and without information about others' behavior. Subjects have to decide between a 'registered' income, the realization of which will be known to the tax authority for sure, and an 'unregistered' income that will only be known with some probability. This unregistered income comes from self-employment in the Tax treatment and from black labor supplementing some unemployment compensation in the Welfare treatment. Subjects have then to decide on whether reporting their income or not, knowing the risk of detection. The results show that (i) individuals evade more in the Welfare treatment than in the Tax treatment; (ii) many subjects choose an option that allows for tax evasion or welfare fraud but report their income honestly anyway; (iii) examples of low compliance tend to increase tax evasion while examples of high compliance exert no influence; (iv) tax evasion is more frequent in France and the Netherlands; Walloons evade taxes less than the Flemish. There is no cross-country difference in welfare dodging.
    Keywords: tax evasion, social fraud, social comparisons, cross-country comparisons, experiments
    JEL: H26 H31 I38 C91
    Date: 2011–03
  3. By: Jordi Caballé; Judith Panadés
    Abstract: This paper analyzes the behavior of the tax revenue to output ratio over the busi- ness cycle. In order to replicate the empirical evidence, we develop a simple model combining the standard Ak growth model with the tax evasion phenomenon. When individuals conceal part of their true income from the tax authority, they face the risk of being audited and hence of paying the corresponding fine. Under the empiri- cally plausible assumptions that the intertemporal elasticity of substitution exhibits a sufficiently small value and that productivity shocks are serially correlated, we show that the elasticity of government revenue with respect to output is larger than one, which agrees with the empirical evidence. This result holds even if the tax system displays flat tax rates. We extend the previous setup to generate larger fiscal deficits when the economy experiences a recession.
    Keywords: Tax evasion, Technology shocks, Growth
    JEL: H23 H26 O41
    Date: 2011–04–06
  4. By: Martin Feldstein; Daniel Feenberg; Maya MacGuineas
    Abstract: This paper analyzes a new way of reducing the major individual tax expenditures: capping the total amount that tax expenditures as a whole can reduce each individual's tax burden. More specifically, we examine the effect of limiting the total value of the tax reduction resulting from tax expenditures to two percent of the individual's adjusted gross income. Each individual can benefit from the full range of tax expenditures but can receive tax reduction only up to 2 percent of his AGI. Simulations using the NBER TAXSIM model project that a 2 percent cap would raise $278 billion in 2011. The paper analyzes the revenue increases by AGI class. The 2 percent cap would also cause substantial simplification by inducing more than 35 million taxpayers to shift from itemizing their deductions to using the standard deduction. For any taxpayer for whom the 2 percent cap is binding, a cap would reduce the volume of wasteful spending and the associated deadweight loss. Even for those taxpayers for whom the cap is not binding but who are induced by the cap to shift from itemizing to using the standard deduction, the deadweight loss associated with deductible expenditures would be completely eliminated
    JEL: H2
    Date: 2011–04
  5. By: Zhou, Fujin; Oostendorp, Remco
    Abstract: This paper uses firm-level survey data matched with official tax records to estimate the unobserved true sales of formal firms in Mongolia. Taking into account firm-level incentives to comply with taxes and a production function technology linking unobserved true sales with observable firm-level production characteristics, the authors derive a multiple-indicators, multiple-causes model predicting unobserved true sales. Comparing predicted true sales with sales reported to the tax office, the analysis finds that 38.6 percent of firm-level sales are underreported. It also finds evidence that firm-level survey data suffer from significant underreporting. Finally, the paper compares this approach with two alternative approaches to measuring underreporting by firms.
    Keywords: Taxation&Subsidies,Microfinance,Emerging Markets,Economic Theory&Research,Debt Markets
    Date: 2011–04–01
  6. By: Barnes, Paula (Productivity Commission)
    Abstract: This Productivity Commission staff working paper (by Paula Barnes) examines sectoral investment in intangible assets in Australia following on from a previous paper on an examination of intangibles assets in the market sector as a whole. It highlights some significant issues relating to the measurement of intangibles and their contribution to productivity, finding that estimates of intangibles at the aggregate level mask considerable sectoral differences. <p>In recent years increased attention has been given to the contribution to economic growth of intangible assets such as knowledge, firm-specific skills and better ways of doing business. But most intangibles are treated as current expenses in official statistics, rather than as assets — despite the fact that they provide services in more than one period. This makes it difficult to examine their role in the economy. It leads to an understatement of investment in the economy and may also affect measures of productivity growth. <p>This paper addresses two questions: does the importance of intangibles as part of total investment vary across sectors?; and does the exclusion of many intangibles from investment measurement affect the measures of sectoral economic growth and productivity? <p>The views expressed in this paper are those of the staff involved and do not necessarily reflect those of the Productivity Commission.
    Keywords: intangible assets; sectoral investment; productivity; assets; human capital; R&D; research and development; brand equity
    JEL: E24 O30 O40
    Date: 2010–07
  7. By: Daria Burnes; David Neumark; Michelle J. White
    Abstract: We test the hypothesis that local government officials in jurisdictions that have higher local sales taxes are more likely to use fiscal zoning to encourage retailing. We find that total retail employment is not significantly affected by local sales tax rates, but employment in big box and anchor stores is higher significantly in jurisdictions with higher sales tax rates. This suggests that local officials in jurisdictions with higher sales taxes concentrate on attracting large stores and shopping centers. We also find that the effect of local sales taxes on big box and anchor store retail employment is larger in county interiors, where residents tend to be captive to local retailers. Finally, fiscal zoning has the opposite effect on manufacturing employment, suggesting that local officials’ efforts to attract shopping centers and large stores crowd out manufacturing.
    JEL: H71 J2 R52
    Date: 2011–04

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