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on Accounting and Auditing |
| By: | Longobardi, Ernesto; Polito, Vito (Cardiff Business School) |
| Abstract: | This paper studies the effectiveness of corporate tax incentives in reducing the effective tax rate (ETR) on income from capital to stimulate business investment during economic downturns. We focus on tax rate incentives (TRIs), such as corporate tax rate cuts, and tax base incentives (TBIs), such as increased capital allowances. The standard economic theory states that TRIs reduce the ETR by decreasing tax payments on corporate profits. TBIs instead reduce the ETR as they defer firms tax payments, in turn increasing the present value of dividend distribution. However, this theory does not consider that, in reality, firms face accounting constraints preventing any distribution of cash flows arising from TBIs. For this reason, the standard economic analysis overstates the benefit of any TBI relative to that of TRIs. The paper incorporates accounting constraints on dividend policy into the model for the computation of the ETR and employs the new model to recalculate ETRs in the US and in the UK during 1980-2010. The empirical results confirm that the benefit of TBIs is significantly overstated by the standard theory, and tax rate cuts are more effective in reducing the ETR. We show that this result holds regardless of the form of investment finance (retained earning, new equity and debt), the type capital asset (building and plant and machinery), the level of capital income taxation (corporate and shareholders), and the value of accounting depreciation relative to economic depreciation. |
| Keywords: | Capital income taxation; dividend policy; effective marginal tax rates; financial constraints |
| JEL: | H3 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2011/15&r=acc |
| By: | Finke, Katharina; Heckemeyer, Jost H.; Reister, Timo; Spengel, Christoph |
| Abstract: | The German corporate tax reform of 2008 has brought about important cuts in corporate tax rates, which were at the same time accompanied by significant changes in the determination of the tax base for both major German corporate taxes - corporate income tax and trade tax. The reform followed the distinct and internationally prevalent pattern of tax rate cut cum base broadening. Its implications are thus not unique to Germany. Especially in view of the current economic crisis, questions on the distribution of the tax burden among firms of different characteristics have arisen and still remain at the heart of the academic and political debate in Germany and other countries. In this paper we present a new corporate microsimulation model, ZEW TaxCoMM, which allows for the coherent micro-based analysis of revenue implications of tax reforms and the distribution of tax consequences among heterogeneous firms. The model processes firm-level financial accounting input data and derives the firm specific tax base and tax due endogenously in accordance with the tax code. To smooth out distortions between the sample and the population of German corporations, the sample is extrapolated on the basis of the corporate income tax statistic. The simulation results show inter alia that the average annual relief as measured by the average decline in the effective tax burden on cash flow amounts to 2.8 percentage points for large corporations and to 6 percentage points for small corporations. Furthermore, the results illustrate that firms with low profitability, high debt ratio and high capital intensity benefit least from the reform. As to tax revenues, the reform induced decrease amounts to 9.8 billion and the trade tax gains fiscally in importance. -- |
| Keywords: | Tax reform,microsimulation,tax policy evaluation |
| JEL: | H25 H32 K34 C8 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:10036r&r=acc |
| By: | Polito, Vito (Cardiff Business School) |
| Abstract: | The accounting and economic literature have long highlighted the potential implications of deferred taxation for tax policy analysis. This paper incorporates deferred taxation into the neoclassical investment model for the computation of the Effective Tax Rate (ETR) on business investment and revisits the empirical evidence on the evolution of ETRs in the United States over the last decade. The numerical results show that after including deferred taxation there is little differential in the ETRs across assets; ETRs in the 2000s have been essentially in line with statutory rates; and partial expensing had little effect on ETRs. These results hold whether investment is financed by equity or debt; profits are distributed to individual shareholders through dividends, interests or capital gains; and regardless of the differential between book and economic depreciation. |
| Keywords: | Deferred taxation; effective marginal tax rates; taxation of income from capital |
| JEL: | H3 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2011/14&r=acc |
| By: | Polito, Vito (Cardiff Business School) |
| Abstract: | Empirical evidence suggests that the Effective Marginal Tax Rate (EMTR) on income from capital has increased considerably in both the United States and the United Kingdom over the period 1982-2005. This evidence contradicts the corporate tax literature which predicts that the EMTR should instead fall over time as a result of increasing international capital mobility and higher tax competition between governments. This paper argues that this inconsistency is entirely due to the fact that EMTRs on income from capital are currently computed from versions of the neoclassical investment model which do not take into account financial constraints on dividend policy faced by firms investing in both the United States and the United Kingdom. The paper incorporates financial constraints on dividend policy into the analytical framework for the computation of the EMTR and employs the new model to re-calculate time series of the EMTRs in both countries. The new empirical results show that, in contrast to the existing evidence, the EMTR on investment financed by either retained earnings or new equity has indeed declined over time in both countries, while the EMTR on debt-financed investment has remained relatively stable. |
| Keywords: | Capital income taxation; dividend policy; effective marginal tax rates; financial constraints |
| JEL: | H3 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2011/13&r=acc |
| By: | Robert Hofmeister (Department of Economics, University of Konstanz, Germany) |
| Abstract: | This paper proposes a generational accounting approach to valuating research. Based on the flow of scientific results, a value-added (VA) index is developed that can, in principle, be used to assign a monetary value to any research result and, by aggregation, on entire academic disciplines or sub-disciplines. The VA-index distributes the value of all applications that embody research to the works of research which the applications directly rely on, and further to the works of research of previous generations which the authors of the immediate reference sources have directly or indirectly made use of. The major contribution of the VA-index is to provide a measure of the value of research that is comparable across academic disciplines. To illustrate how the generational accounting approach works, I present a VAbased journal rating and a rating of the most influential recent journal articles in the field of economics. |
| Keywords: | Research evaluation, research accounting, journal ranking, citations |
| JEL: | A13 A14 I23 |
| Date: | 2011–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:1125&r=acc |
| By: | Richard V. Burkhauser; Jeff Larrimore; Kosali I. Simon |
| Abstract: | Researchers considering levels and trends in the resources available to the middle class traditionally measure the pre-tax cash income of either tax units or households. In this paper, we demonstrate that this choice carries significant implications for assessing income trends. Focusing on tax units rather than households greatly reduces measured growth in middle class income. Furthermore, excluding the effect of taxes and the value of in-kind benefits further reduces observed improvements in the resources of the middle class. Finally, we show how these distinctions change the observed distribution of benefits from the tax exclusion of employer provided health insurance. |
| JEL: | H2 H24 I18 J3 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17164&r=acc |
| By: | Popesc, Eleodor |
| Abstract: | Entities frequently spend resources or attire debts to purchase, develop, maintain or extend intangible resources like scientific or technical knowledge, design and implementation of new processes and systems, licenses, intellectual property, knowledge on market and brands (including trademarks and advertising titles). Commune samples of incorporated elements in these vast directions are software, patents, authors right, cinematography movies, consumer lists, rights concerning mortgage services, fishing licenses, importation quotes, franchise, relationships with consumers or suppliers, consumer’s loyalty, market share and marketing rights. Not all the above described elements correspond to the definition of an intangible asset, namely the identifiable character, control on some resources and the existence of some future economical advantages. In case an element entering under the incidence of the present standard does not correspond to the definition of an intangible asset, the expenses with purchase or its realization on internal level is recognized as expense when paid. Still, in case achieved as part of a mixture of enterprises, the element in discussion is part of the commercial fund, recognized at the purchase moment. An intangible asset must be recognized in the balance sheet in case estimated to generate economical advantages for the entity and the cost of the asset can be discharged in a credible/reliable manner. Moreover, in respect to this general definition, the International Accounting Standards come with specific elements connected to the recognition of the intangible asset in the financial situations. According to IAS 38 “Intangible assets”, an intangible asset is an asset that can be identified as non-monetary, without material support and possessed to be used in the production process or for the supply of goods or services, to be rented to some other persons, or for administrative purposes. |
| Keywords: | Intangible assets; tangible assets; International standard; accounting; amortization; cost; expenses |
| JEL: | D2 |
| Date: | 2011–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:31721&r=acc |