nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2011‒07‒27
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Reconstruction of tax balance sheets based on IFRS information: A case study of listed companies within Austria, Germany, and the Netherlands By Kager, Rebekka; Niemann, Rainer
  2. An Optimal Tax System By Louis Kaplow
  3. Tax Morale, Slippery-Slope Framework and Tax Compliance: A Cross-section Analysis By Gabriele Ruiu; Gaetano Lisi
  4. The EITC, Tax Refunds, and Unemployment Spells By Sara LaLumia
  5. Do financial reforms complementarity and reforms sequence matter for international capital inflows? By Bicaba, Zorobabel T.
  6. How Neopatrimonialism Affects Tax Administration: A Comparative Study of Three World Regions By Christian von Soest; Karsten Bechle; Nina Korte
  7. Taxation and political stability By Mutascu, Mihai; Tiwari, Aviral; Estrada, Fernando
  8. Evolutionary model of existing competition and voluntary disclosure By Manuel Núñez-Nickel; Susana Gago Rodríguez

  1. By: Kager, Rebekka; Niemann, Rainer
    Abstract: The internationalisation of financial accounting and the European Commission's ambition to harmonise corporate taxation have raised the question whether IFRS accounts could be used for tax purposes. In order to quantify the effect of an IFRS-based taxation on corporate tax burdens in different EU member states, we estimate firms' tax equity using notes on income taxes in IFRS financial statements of companies listed in Austria, Germany, and the Netherlands. The difference between estimated tax equity and IFRS-equity, adjusted for the effect resulting from the recognition of deferred taxes, indicates the effect of using IFRS as a tax base on corporate tax burden. We find that estimated tax equity is mostly lower than IFRSequity, indicating that an IFRS-based taxation would often increase the corporate tax burden. The median of estimated tax equity is 5.6% (Austria), 6.4% (Germany) and 9.0% (the Netherlands) below IFRS-equity. Our results suggest that using IFRS for the determination of taxable income would often increase corporate tax burden. However, an IFRS-based taxation does not always induce higher equity as often argued in the literature. In 307 of 1.113 totally analysed firm-years, estimated tax equity exceeds IFRS-equity. Analysing IFRS-tax differences on a balance sheet caption level, we find that the most important differences can be observed for intangibles and provisions. We find for all three analysed countries that IFRS-tax differences relating to inventories, receivables, and liabilities are typically small. We also approximate the total stock of unused tax losses and the amount of useable tax losses which can provide additional information about the management's estimates of future earnings. We find that deferred tax assets for unused tax losses are depreciated to a substantial extent, indicating that companies often assume insufficient future taxable income to utilise the total stock of tax loss carry-forwards. --
    Date: 2011
  2. By: Louis Kaplow
    Abstract: A notable feature and principal virtue of Tax by Design is its system-wide perspective on different elements of the tax system. This review essay builds on this trait and offers a more explicit foundation for the report’s general approach, drawing on a distribution-neutral methodology that is developed in other work. This technique is then employed to illuminate and extend Tax by Design’s analysis regarding the VAT, environmental taxation, wealth transfer taxation, and income transfers.
    JEL: H20 H21 H23 H24 H53
    Date: 2011–07
  3. By: Gabriele Ruiu (University of Cassino); Gaetano Lisi (University of Cassino)
    Abstract: Following two important strands of tax compliance literature, this empirical paper develops a cross-section analysis in order to test both the role of tax morale on tax compliance decisions and the main predictions of the slippery slope framework. Using data from the World Value Surveys (WWS), we find empirical support for the slippery slope framework, since trust in and power of tax authorities are negatively and significantly related to a proxy for tax non-compliance behavior given by the size of the hidden economy. In particular, trust in tax authorities exerts a larger effect on shadow economy than the power of tax authorities. Instead, the relation between tax morale and our proxy for tax evasion is not statistically significant.
    JEL: A13 H26 K42 C31
    Date: 2011–07–18
  4. By: Sara LaLumia (Williams College)
    Abstract: The Earned Income Tax Credit generates large average tax refunds for low-income parents, and these refunds are distributed in a narrow time frame. I rely on this plausibly exogenous source of variation in liquidity to investigate the effect of cash-on-hand on unemployment duration. Among EITC-eligible women, unemployment spells beginning just after tax refund receipt last longer than unemployment spells beginning at other times of year. There is no evidence that tax refund receipt is associated with longer unemployment duration for men, or that the longer durations for women are associated with higher-quality subsequent job matches.
    Keywords: Tax evasion, compliance, honesty, dependent exemption
    JEL: H26 H24
    Date: 2011–07
  5. By: Bicaba, Zorobabel T.
    Abstract: As economic reforms are mutually interdependent, a liberal policy package needs internal coherence. How can a coherent reform strategy be achieved for a well-balanced and functional economic system? In this paper, we analyze the relationship between financial reforms coherence and international capital inflows (foreign direct investments (FDI) and portfolio investments). We consider a package of eight financial reforms, comprising interest rate deregulation, credit ceiling and directed-credit programs liberalization, elimination of banking sector entry barriers, privatization of state owed banks, development of security markets and banking sector supervision measures. Complementarity is measured through the reciprocal of the Herfindahl-Hirschman concentration index. The results suggest that the manner with which financial reforms are implemented matters. Particularly, complementarity increases FDI inflows by 0.10%. Moreover, this effect depends on the location of the countries on the distribution of financial reforms level. Indeed, the countries located above the median value of financial reform level experience larger FDI and portfolio investment inflows than others. Finally, when privatization of state owned banks and the adoption of a capital adequacy ratio based on the Basle I standard occur after other preliminary financial reforms, the returns to complementarity are higher. In others words, a developed and relatively safe domestic financial system attracts more FDI and portfolio investments than a developed but unsafe financial system. --
    JEL: C23 E61 F32
    Date: 2011
  6. By: Christian von Soest; Karsten Bechle; Nina Korte
    Abstract: Neopatrimonialism is a concept that has predominately been applied to describe governance in sub?Saharan Africa. Recently, though, it has also been used to describe states from other world regions. However, scholars have rarely attempted to systematically compare neopatrimonial rule in different regional settings. This paper aims to narrow this gap by examining the effect of neopatrimonialism on the tax administration as a core state function in six countries from three different world regions: Argentina, Venezuela, Indonesia, the Philippines, Kenya and Zambia. We conclude that neopatrimonialism is a valuable concept for comparative area studies with the potential to foster dialogue on the “state in operation” across the regional divide. However, several indicators are more valid for some world regions than for others. We find that there is no systematic relationship between neopatrimonial trajectories and the strength of tax administration. Individual actor decisions influence the outcomes of neopatrimonialism substantially.
    Keywords: neopatrimonialism, governance, institutions, Argentina, Venezuela, Indonesia, Philippines, Kenya, Zambia
    Date: 2011–07
  7. By: Mutascu, Mihai; Tiwari, Aviral; Estrada, Fernando
    Abstract: The present study is, in particular, an attempt to test the relationship between tax level and political stability by using some economic control variables and to see the relationship among government effectiveness, corruption, and GDP. For the purpose, we used the Vector Autoregression (VAR) approach in the panel framework, using a country-level panel data from 59 countries for the period 2002 to 2008. The salient features of this model are: (a) simplicity is based on a limited number of variables(five) are categorical or continuous and not dependent on complex interactions or nonlinear effects. (b) accuracy: a low level of errors, the model achieves a high percentage of accuracy in distinguishing countries with inclination to political instability, compared to countries with political stability, (c) generality: the model allows to distinguish types of political instability, both resulting from acts of violence and failure of democracies to show, and (d) novelty: the model incorporates a tool that helps evaluate and exclude many variables used by the conventional literature. This approach is mainly based on the recognition of state structures and the relations between elites and parties.
    Keywords: Taxation, Political Stability, Connection, Effects, Panel VAR analysis
    JEL: D70 H20 C23
    Date: 2011–07–16
  8. By: Manuel Núñez-Nickel; Susana Gago Rodríguez
    Abstract: We analyze how, in the absence of capital market incentives, the influence of existing competition on voluntary disclosure is an evolving process which has a non-monotonic design. The progressive capability of rivals to forecast significant information and the increasing losses of abnormal profits during the industry life cycle generate fears and incentives that change the sign of the relationship between competition and the probability of voluntary disclosure throughout the industry’s development. We support this new design empirically by applying a semi-parametric Cox model to 28 years of archival data for the entire Spanish newspaper sector. We also find that the best fitting model is the first harmonic of a Fourier series
    Keywords: Competition, Voluntary disclosure, Fourier series, Cox model
    Date: 2010–10

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