nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2011‒05‒30
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  1. On the Sustainability of Partial Tax Harmonization among Asymmetric Countries By Jun-ichi Itaya; Makoto Okamura; Chikara Yamaguchi
  2. Economic crisis and taxation in Europe By Luigi, Bernardi
  3. Explaining Property Tax Collections in Developing Countries: The Case of Latin America By Jorge Martinez-Vazquez; Cristian Sepúlveda
  4. Tendenze dei prelievi tributari ed effetti fiscali della crisi finanziaria nell'Unione europea e in Svizzera By Luigi, Bernardi
  5. The hidden burden of the income tax: Compliance costs of German individuals By Blaufus, Kay; Eichfelder, Sebastian; Hundsdoerfer, Jochen
  6. Taxes, agglomeration rents and location decision of firms By Karen Crabbe; Karolien De Bruyne
  7. When Striking an Awkward Balance Means Striking Out: Budget 2011 By Alexandre Laurin; Finn Poschmann; William B.P. Robson
  8. Practical approach to estimating cost of capital By Skardziukas, Domantas
  9. Fiscal policy and debt dynamics in developing countries By Ilzetzki, Ethan
  10. Capital, liquidity standards and macro prudential policy tools in financial supervision: addressing sovereign debt problems By Ojo, Marianne

  1. By: Jun-ichi Itaya; Makoto Okamura; Chikara Yamaguchi
    Abstract: This paper investigates the conditions under which partial harmonization for capital taxation is sustained in a repeated interactions model of tax competition when there are three countries asymmetric in repect to their capital endowments. We show that regardless of the structure of the coalition (i.e., any group of asymmetric countries), whether partial tax harmonization is sustainable or not crucially depends on the capital endowment of the median country relative to those of the large and small countries. The most noteworthy finding is that the closer the capital endowment of the median country to the average capital endowment of the large and small countries, the less likely is the tax harmonization including the median country to prevail and the more likely is the partial tax harmonization excluding the median country to prevail
    JEL: H73 F59 F21
    Date: 2011–03
  2. By: Luigi, Bernardi
    Abstract: The recent economic crisis and taxation in the advanced countries - especially in the European nations - are linked in several ways. The tax systems may have exacerbated the crisis, and this raises the question of the need for a better system of taxation in certain economic sectors, especially in the banking sector. It is worthwhile examining the various different effects of the crisis on different kinds of tax revenue, as a result of both the automatic stabilizers and the discretional measures which were adopted to sustain the economies. We are going to show that while the former have had a relatively substantial impact, the latter have been of negligible effect. The paper initially offers a critical overview of the just mentioned topics. The European countries are now faced with a difficult trade - off between further tax reductions to sustain economic recovery, and the raising of taxes in order to help stabilize public budgets and debts. Broadly speaking, the most suggested solution consists in the idea of raising taxes whilst making them more growth - friendly. With this in mind, the paper then reconsiders and compares the latest, authoritative proposals for tax reform which in recent years have been proposed not only by international economic organizations, but also by studies in the field. The longstanding principles of broadening the tax base, reducing rates and simplifying the tax system still appear to be at the order of the day. The idea of shifting the tax burden away from labour and capital, whilst increasing taxes on consumption, properties and environmental resources, has also received large support. It is again suggested that efficiency - induced neutrality should characterize the design of the main taxes. While those political factors that have impeded reforms in recent years are still at work, we should remember that tax systems also have other targets than that of favouring neutrality - efficiency, and that in some countries (including Italy) the most urgent, radical reform required is the downsizing of an abnormal level of tax evasion.
    Keywords: Economic Crisis; Taxation; Europe
    JEL: H20 H25 H24
    Date: 2011–05–18
  3. By: Jorge Martinez-Vazquez (International Studies Program. Andrew Young School of Policy Studies, Georgia State University); Cristian Sepúlveda (International Studies Program. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: This paper analyzes the problem of collecting property taxes in fiscally decentralized developing economies. The property tax is arguably the most important source of own revenues for local governments around the world, and economists generally agree that, although imperfect, the property tax is a good local tax. In practice, however, the property tax does not always become a productive revenue source and local governments do not gain the fiscal autonomy required to realize the benefits of fiscal decentralization. This problem is rather common among developing economies and particularly severe in Latin America. One of the main reasons for the poor tax performance of Latin American countries seems to be the lack of administrative capacity at the local level. This problem is notably aggravated, we argue, by a deficient design of the fiscal decentralization system. We also identify the main determinants of property tax performance in Latin American countries, and provide guidance for future reforms in the region.
    Date: 2011–05–10
  4. By: Luigi, Bernardi
    Abstract: EU15 and Switzerland are two examples of high and, respectively, low taxation in Europe. It is then interesting to compare the trends that have characterized - in these two different situations - the tax burden, both total and disaggregated. Therefore the first part of the paper discusses the quantitative trends and the institutional developments of the Swiss and of EU15’ tax systems, especially since the ‘90s. The paper then considers the interplay between European taxation and economic and financial crisis, both as to the origin of the crisis and as to its effects on levels and characters of the tax burden. The paper is closed by an assessment of recent proposals for tax reform. The goal is to avoid recessionary effects of the levels of revenues, which are now needed to stabilize public finances in Europe, damaged by the crisis.
    Keywords: Taxation; Europe; Switzerland; Financial Crisis
    JEL: H20 H25 H24
    Date: 2011–05–20
  5. By: Blaufus, Kay; Eichfelder, Sebastian; Hundsdoerfer, Jochen
    Abstract: We analyze the compliance costs of individual taxpyers resulting from the German income tax. using survey data that has been raised between December 2008 and April 2009, we find evidence for a considerably higher cost burden of self-employed taxpaxers. Taxable income and the demand for external support are positively correlated with compliance costs, while the time effort of female taxpayers is significantly lower. We also find evidence for a positive correlation of education and tax knowledge with the compliance burden. By contrast, a joint assessment of a married couple seems to reduce the monetized time effort. The aggregated cost burden of German income taxpayers amounts to 6.1-7.2 billion €, respectively 3.2-3.7 % of the income tax revenue in 2007. This estimate is higher than latest projections in a number of other European countries like Spain and Sweden, but significantly lower than results for the United States and Australia. --
    Keywords: tax complexity,tax compliance costs,compliance burden,red tape,personal income tax
    JEL: H21 H23 H25 H26 H83
    Date: 2011
  6. By: Karen Crabbe; Karolien De Bruyne
    Abstract: The goal of this paper is to analyse the impact of interactions between tax rates and agglomeration rents on location decisions of firms within Belgium. In the theoretical literature it is argued that both location determinants may weaken each other’s impact. Using the number of new firms at the sector level for 43 Belgian districts, we show that local effective tax rates either have no or a negative impact on location decisions. Moreover, both types of agglomeration rents in a district are important for location decisions. The presence of firms in a district attracts new firms, while the presence of firms in the same sector deters firm entry due to competition. However, the interaction effect between taxes and agglomeration rents on firm entry is significant. We show that a higher effective tax rate in a district weakens the positive impact of the agglomeration rents on location decisions of firms.
    Date: 2011
  7. By: Alexandre Laurin (C.D. Howe Institute); Finn Poschmann (C.D. Howe Institute); William B.P. Robson (C.D. Howe Institute)
    Abstract: The 2011 Canadian federal budget, should it succeed in Parliament, would launch a new strategic spending review, alongside minor cost-cutting initiatives. The fate of the budget balance and the potential for an early return to surplus as envisioned, therefore, depend entirely on the effectiveness of these measures, which cannot be known before next year.
    Keywords: Fiscal and Tax Competitiveness, Canada, Federal Budget, balanced budget
    JEL: H60 H62
    Date: 2011–03
  8. By: Skardziukas, Domantas
    Abstract: The recent as well as precedent market crashes has increased a number of already existing biases when estimating a forward looking cost of capital for company’s stakeholders. With cost of capital being essential in corporate valuation and decision making the following paper analyzes the research carried out by numerous academics up to date and provides a comprehensive overview on the appropriate choices of inputs and methods for estimating cost of capital. The paper draws the necessary attention to the times of crises. An additional study shows how different preferences can result in variation in cost of equity capital and terminal value of a company.
    Keywords: corporate finance; valuation; cost of capital; beta; recession; credit crunch; cost of equity
    JEL: G1 G3 G0
    Date: 2010–10–01
  9. By: Ilzetzki, Ethan
    Abstract: Using a new tax database for 28 countries and a variety of econometric methods, this paper contributes to the debate on the effects of fiscal policy on economic activity in a number of ways. The analysis finds that tax cuts have a stimulative effect on economic growth in developing countries. Lowering the personal income tax rate by 1 percentage point, or cutting revenues by 1 gross domestic product of gross domestic product increases gross domestic product by 0.3-0.4 percent on impact and 0.8 percent in the long run. The author finds that cuts in personal income taxes are more effective in stimulating growth than cuts in corporate or valued added tax rates. The author incorporates debt dynamics into a fiscal vector autoregression model for a number of developing countries. Existing estimates of the effects of fiscal policy on growth use linear time-series methods, which may assess the effects of fiscal policy along a debt-path that is unsustainable. Incorporating the non-linear relationship between government expenditure, taxes, and debt alters estimates of the impact of fiscal policy on gross domestic product in several countries. In Brazil, for example, conventional time-series methods may overstate the effects of fiscal policy on gross domestic product, by ignoring the detrimental effects of debt accumulation.
    Keywords: Debt Markets,Taxation&Subsidies,Emerging Markets,Economic Theory&Research,Tax Law
    Date: 2011–05–01
  10. By: Ojo, Marianne
    Abstract: During the recent Financial Crisis, as well as the 2010 and ongoing European Sovereign Debt Crisis, several governments had/have had to raise their debt levels in order to stabilize their economies. The principal problem attributed to sovereign debts, which is linked to their characteristics, is the possibility of defaults occurring in relation to these – since they are usually accompanied without collaterals. The possibilities of such defaults occurring are further increased where bailouts are granted in relation to these debts. Increased doubts in relation to the likelihood of larger sovereigns “rolling over maturing debt on their own”, as well as the consequential occurrence of “very high, economically penalizing, interest rates”, is considered to be the present reality. This paper aims to illustrate why distressed countries, once granted bail-outs, should be given full assurance (by grantors of the bail-outs) that continued assistance will be provided in the form of accompanying aids to assist in completing repayments relating to such bailouts (through the extension of repayment periods or reduced interest rates) – rather than aggravating their position (hence facilitating the risk of defaults). As well as a consideration of improvements which have been introduced through Basel III in respect of prudential supervisory tools (supervisory tools such as capital, liquidity requirements, and macro prudential policy tools), and an analysis of recent efforts which have been undertaken by the Basel Committee to address information gaps in derivative markets (a source of huge losses to many major banks), the paper also explores how the new Basel liquidity standards (that is, the Liquid Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR), could be effectively implemented in mitigating sovereign debt crises. Ultimately, the paper will seek to demonstrate that additional leverage ratios which are to be introduced by the Basel Committee, will play a very crucial role if the new liquidity standards are to achieve their desired effects and stated objectives.
    Keywords: European Sovereign Debt Crisis; bail-outs; Basel III; Dodd Frank Act; Capital standards; Liquidity Standards; macro prudential policy tools; Over-the-Counter (OTC) derivatives; Credit-Default-Swaps (CDS); markets; disclosure; bank; regulation; leverage ratios
    JEL: D0 E0 K2 G2 F3 D8 E4 E3
    Date: 2011–05–24

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