nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2011‒11‒01
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Income Tax Considerations of Business Transfers By Hofstrand, Donald; Edwards, William M.
  2. Trade Integration and Business Tax Differentials : Theory and Evidence from OECD Countries By Nelly Exbrayat; Benny Geys
  3. Relative Consumption Concerns and the Optimal Tax Mix By Paul Eckerstorfer
  4. Optimal redistributive taxation in a multi-externality model By Paul Eckerstorfer
  5. Redistributive Impacts of Personal Income Tax in Urban China By Jing Xu; Ximing Yue
  6. A Multi-Agent Model of Tax Evasion with Public Expenditure By Paolo Pellizzari; Dino Rizzi; ;
  7. Aggregate instability under balanced-budget consumption taxes: a re-examination By Carine Nourry; Thomas Seegmuller; Alain Venditti
  8. Optimal Piecewise Linear Income Taxation By Apps, Patricia; Long, Ngo Van; Rees, Ray
  9. Effective Tax and Subsidy Rates on Human Capital in Canada By John B. Burbidge; Kirk A. Collins; James B. Davies; Lonnie Magee
  10. Cost-Benefit Analysis for Investment Decisions: Chapter 7 (Principles Underlying The Economic Analysis of Projects) By Glenn Jenkins; Chun-Yan Kuo; Arnold C. Harberger

  1. By: Hofstrand, Donald; Edwards, William M.
    Date: 2011–10–26
  2. By: Nelly Exbrayat (Université de Lyon, Lyon, F-69003, France ; Université Jean Monnet, Saint-Etienne, F-42000, France ; CNRS, GATE Lyon St Etienne, Saint-Etienne, F-42000, France); Benny Geys (Norwegian School of Management BI, Nydalsveien 37, N-0442 Oslo, Norway and Social Science Research Center Berlin (WZB), Reichpietschufer 50, D-10785 Berlin, Germany)
    Abstract: Building on recent contributions to the New Economic Geography literature, this paper analyses the relation between asymmetric market size, trade integration and business income tax differentials across countries. First, relying on a foot-loose capital model of tax competition, we illustrate that trade integration (or decreasing trade costs) reduces the importance of relative market size for differences in the extent of corporate taxation between countries. Then, using a dataset of 26 OECD countries over the period 1982-2004, we provide supportive evidence of these theoretical predictions : i.e., market size differences are strongly positively correlated with corporate income tax differences across countries but, crucially, trade integration weakens this link. These findings are obtained controlling for the potential endogeneity of trade integration and are robust to various alternative specifications and robustness checks.
    Keywords: Tax competition, Trade integration, New Economic Geography, Tax differentials
    JEL: H2 H3 C23 F12
    Date: 2011
  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: Paul Eckerstorfer (Department of Economics, Johannes Kepler University Linz, Austria)
    Abstract: This paper extends the previous literature on optimal redistributive taxation in the presence of externalities to a multi-externality setting. While taxes on income and on 'clean' commodities are still unaffected by the externalities, which confirms previous results, I find that the existence of more than one externality-generating commodity has important implications for the optimal Pigouvian tax rates. In general the Pigouvian parts of taxation depend also on the externalities induced by the consumption of the other commodities, implying that the interdependence of the externality-generating commodities is relevant for tax policy.
    Keywords: Optimal Taxation, Externalities
    JEL: D82 H21 H23 H24
    Date: 2011–07
  5. By: Jing Xu (The People's University of China); Ximing Yue (The People's University of China)
    Abstract: Not available.
    Date: 2011
  6. By: Paolo Pellizzari (Department of Economics, University Of Venice Cà Foscari); Dino Rizzi (Department of Economics, University Of Venice Cà Foscari); ;
    Abstract: We develop a model where heterogeneous agents maximize their individual utility based on (after tax) income and on the level of public expenditure (as in Cowell, Gordon, 1988). Agents are different in risk aversion and in the relative preference for public expenditure with respect to personal income. In each period, an agent can optimally conceal some income based on conjectures on the perceived probability of being subject to audits, the perceived level of public expenditure and the perceived amount of tax paid by other individuals. As far as the agent-based model is concerned, we assume that the Government sets the tax rate and the penalties, uses all the revenue to finance public expenditure (with no inefficiency) and fights evasion by controlling a (random) fraction of agents. We show that, through computational experiments based on micro-simulations, stable configurations of tax rates and public expenditure endogenously form in this case as well. In such equilibrium-like situations we find: • a positive relationship between the tax rate and evasion still arises. • tax compliance mainly depends on the distribution of personal features like risk-aversion and the degree of preference for public expenditure. • an endogenous level of tax evasion that is almost not affected by reasonable rates of control. A proper choice of the tax rate results instead in voluntary partial compliance. • the enforcement of higher compliance rates requires unrealistic and costly large-scale audits.
    Keywords: Tax evasion, public expenditure, agent-based models
    JEL: H26 H40 C63
    Date: 2011
  7. By: Carine Nourry (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Thomas Seegmuller (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Alain Venditti (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)
    Abstract: We re-examine the destabilizing role of balanced-budget fiscal policy rules based on consumption taxation. Using a one-sector model with infinitely-lived households, and assuming that preferences are of the Greenwood-Hercovitz-Huffman [8] (GHH) type, we show that non-linear consumption taxation may destabilize the economy, promoting expectation-driven fluctuations, if the tax rate is counter-cyclical. We also exhibit a Laffer curve, which explains the multiplicity of steady states when the tax rate is counter-cyclical. All these results are mainly driven by the absence of income effect. Finally, a numerical illustration shows that consumption taxation may be a source of instability for most OECD countries.
    Keywords: Indeterminacy; endogenous business cycles; consumption taxes; balanced-budget rule; infinite-horizon model
    Date: 2011–10–19
  8. By: Apps, Patricia (University of Sydney); Long, Ngo Van (McGill University); Rees, Ray (University of Munich)
    Abstract: Given its significance in practice, piecewise linear taxation has received relatively little attention in the literature. This paper offers a simple and transparent analysis of its main characteristics. We fully characterize optimal tax parameters for the cases in which budget sets are convex and nonconvex respectively. A numerical analysis of a discrete version of the model shows the circumstances under which each of these cases will hold as a global optimum. We find that, given plausible parameter values and wage distributions, the globally optimal tax system is convex, and marginal rate progressivity increases with rising inequality.
    Keywords: piecewise linear, income, taxation
    JEL: H21 H31 J22
    Date: 2011–10
  9. By: John B. Burbidge (University of Waterloo); Kirk A. Collins (St. Francis Xavier University); James B. Davies (University of Western Ontario); Lonnie Magee (McMaster University)
    Abstract: Effective tax and subsidy rates (ETRs and ESRs) on human capital investment via postsecondary education are estimated for Canada in the years 2000 and 2006. The flattening of the federal personal income tax structure in 2001 substantially reduced the tax disincentive for investment in human capital. Effective subsidy rates also declined as public spending did not keep pace with rising tuition fees. The change on the tax side was strong enough to dominate the subsidy reduction according to our main results, but disaggregation shows that this result did not hold in all cases. Results are shown for College, Master’s, and PhD programs, in addition to Bachelor’s degrees. They are also broken down by gender, and are shown for the 25th and 75th percentiles as well as the median. Provincial detail and 1997 results are provided in the case of Bachelor’s graduates.
    Date: 2011
  10. By: Glenn Jenkins (Queen's University, Canada and Eastern Mediterranean University, Cyprus); Chun-Yan Kuo (Queen's University, Canada); Arnold C. Harberger (University of California, Los Angeles, USA)
    Abstract: While the financial analysis of a project focuses on matters of interest to investors, bankers, public sector budgets, etc., an economic analysis deals with the impact of the project on the entire society. The primary difference between the economic and financial evaluation is that the former aggregates benefits and costs over all the country's residents to determine whether the project improves the level of economic welfare of the country as a whole while the latter conside'rs the project from the point of view of the well-being of a particular institution or subgroup of the population. A broad consensus exists among accountants on the principles to be used in undertaking a financial appraisal of a potential investment. There is also considerable agreement among financial analysts on the cash flow and balance sheet requirements for a public sector project to pay for itself on a cash basis. However, these accounting and financial principles are not a sufficient guide for undertaking an economic appraisal of a project. This chapter explains the relationship between the financial and the evaluations and how the economics is grounded in microeconomic theory and it applications in welfare economics.
    Keywords: economic evaluation, financial appraisal, net cash flow, willingness to pay, economic resource cost
    JEL: H43
    Date: 2011–08

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