nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2011‒10‒15
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Effects of Tax Salience and Tax Experience on Individual Work Efforts in a Framed Field Experiment By Martin Fochmann; Joachim Weimann
  2. Separating the Opposing Effects of Bilateral Tax Treaties By Bruce A. Blonigen; Lindsay Oldenski; Nicholas Sly
  3. Relative Consumption Concerns and the Optimal Tax Mix By Paul Eckerstorfer
  4. Compulsory voting and tax revenues By Mutascu, Mihai
  5. US Tax Discrimination Against Large Corporations Should Be Discarded By Gary Clyde Hufbauer; Martin Vieiro
  6. Competition for foreign capital: Endogenous objective, public investment and tax By Rupayan Pal; Ajay Sharma
  7. Equilibrium Search and Tax Credit Reform By Andrew Shephard

  1. By: Martin Fochmann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Joachim Weimann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: We conduct a framed field experiment with 245 employed persons (no students) as subjects and a real tax, which is levied on the subjects' income from working in our real effort task. In our first three treatments, the net wage is constant but gross wages are subject to different constant marginal tax rates (0, 25%, 50%). It turns out that the effort is significantly higher under the tax than in the no tax treatment. Subjects perceive a too high net wage because they underestimate the tax. We conjecture that tax perception depends on the tax rate, the presentation of the tax and the experience subjects have with taxation. These conjectures are confirmed in four further treatments employing a direct and an indirect progressive tax scale. It turns out that simple flat taxes are particularly prone to being misperceived because their simplicity reduces the tax salience.
    Keywords: Field experiment, real effort experiment, tax perception, tax salience, tax experience, behavioral economics
    JEL: C91 D14 H24
    Date: 2011–08
  2. By: Bruce A. Blonigen; Lindsay Oldenski; Nicholas Sly
    Abstract: Bilateral tax treaties (BTT) are intended to promote foreign direct investment and foreign affiliate activity through double taxation relief. However, BTTs also typically contain provisions that facilitate sharing of tax information between countries intended to curtail tax avoidance by multinational firms. These provisions should disproportionately affect firms that intensively use inputs for which an arms-length price is easily observed, since strategic transfer practices that manipulate tax liabilities are no longer effective with information sharing between countries. Using BEA firm-level data we are able to separately estimate the impacts of double-taxation relief and sharing of tax information on investment behavior of US multinational firms. We find a significant positive effect of new tax treaties on foreign affiliate activity between member nations that is offset (and even reversed) the more a firm relies on inputs traded on an organized exchange (i.e., inputs for which the arms-length price is easily observed). We find these opposing BTT effects for both the intensive margin (sales of existing affiliates) and the extensive margin (entry of new affiliates).
    JEL: F21 F23 H25
    Date: 2011–10
  3. By: Paul Eckerstorfer (Department of Economics, Johannes Kepler University Linz, Austria)
    Abstract: This articles studies the optimal tax mix (taxes on income and commodities) under asymmetric information in a two-type model, when individuals make relative consumption comparisons. The model includes both positional and nonpositional goods, taking into account the fact that relative concerns matter for some but not for all commodities. We find that in general the whole tax system is affected by the externalities caused by the consumption of positional goods, notably also the taxes on income and on a non-positional good. The tax rates on positional goods are higher than in the absence of status effects, reflecting their Pigouvian role. The sign of the Pigouvian part in the income tax schedule is ambiguous and depends crucially on whether status goods are complements or substitutes to leisure.
    Keywords: Optimal Taxation, Externalities, Relative Consumption
    JEL: D62 H21 H23
    Date: 2011–10
  4. By: Mutascu, Mihai
    Abstract: Using a panel-model approach, this paper investigates the validity of the relationship between level of tax revenues and type of voting. The data-set covers the period 2000-2010, and includes 135 countries. The main finding points out that the assumed function is linear and the compulsory vote tends to increase the tax revenues collected by public authority. The analysis in this paper covers the “gap” in the literature in this field.
    Keywords: Tax revenues; Compulsory voting; Voluntary voting; Effects; Tax policy
    JEL: D70 H20 C23
    Date: 2011–10–09
  5. By: Gary Clyde Hufbauer (Peterson Institute for International Economics); Martin Vieiro (Peterson Institute for International Economics)
    Abstract: Public opinion holds that large corporations should pay a higher statutory tax rate than other business firms, and enjoy fewer deductions in computing their taxable income. Americans and their representatives in Congress have long entertained the notion that a corporate check paid to the US Treasury means "somebody else" pays the tax, conveniently forgetting that the money has to come from someplace. As the law is now written, the largest corporations (those with assets of $2.5 billion or more) pay about three-fourths of US corporate income taxes, even though they account for just 57 percent of corporate net income. Discriminatory tax burdens on one group of firms drive scarce capital and entrepreneurial energy to less productive firms, penalizing the entire economy. If the targets of discrimination are the nation's largest firms (the norm in the United States) the country will find it harder to compete on a global scale in industries that require dedicated research for decades, industries that exhibit huge scale economies, and industries that network across national borders. Whatever the relative contribution of large and small companies to gross or net job growth, the bottom line for American workers—and the American economy as a whole—is that it is important to ensure that the United States remains a favorable location for US-based multinational corporations to do business.
    Date: 2011
  6. By: Rupayan Pal (Indira Gandhi Institute of Development Research); Ajay Sharma (Indira Gandhi Institute of Development Research)
    Abstract: In this paper we endogenize the objective functions of the regions as well as their decision to provide public investment in a model of competition for foreign owned mobile capital. We demonstrate that the competing regions can `restrict race-to-the-bottom' in tax rates by deviating away from social welfare to net tax revenue. It is optimal for a region to be fully revenue oriented even if that region's ultimate goal is to maximize social welfare, irrespective of whether the rival region is concerned about social welfare or net tax revenue. Moreover, we demonstrate that the regions have unilateral incentive to spend on public investment, except in case of perfect spillover. In equilibrium, both the regions spend on public investment and end up with Pareto inferior outcomes.
    Keywords: Mobile Capital, Tax Competition, Public Investment, Revenue Orientation, Social Welfare
    JEL: F21 H25 R50 H40 D60
    Date: 2011–09
  7. By: Andrew Shephard (Princeton University)
    Abstract: An empirical equilibrium job search model with wage posting is developed to analyze the labor market impact of UK tax reforms. The model allows for a rich characterization of the labor market, with hours responses, accurate representations of the tax and transfer system, and both worker and firm heterogeneity. The model is estimated with pre-reform longitudinal survey data using a semi-parametric estimation technique, and the impact of actual tax reform policies is simulated. The model predicts that the British Working Families’ Tax Credit and contemporaneous reforms increased employment, with equilibrium effects found to play a relatively minor role.
    Keywords: Labour market equilibrium, job search, wage dispersion, unemployment, monopsony, incidence, tax credits
    JEL: H29 J08 J30 J20
    Date: 2011–09

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