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on Accounting and Auditing |
| By: | Michael P. Devereux; Simon Loretz |
| Abstract: | This paper examines the likely impact of a proposed formula apportionment system for corporation tax in the EU on the inbound investment of US multinational companies. We pay attention to tax planning strategies that may be employed by US multinationals and investigate whether effective tax rates in Europe of US companies differ from those of European companies. The proposal is for an optional system: we estimate the extent to which both European and US companies would be likely to choose it taking into account their existing structures and future investment incentives. The relative position of US and European companies depends crucially on the taxation of foreign passive income. |
| JEL: | H25 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17576&r=acc |
| By: | Stéphane Gauthier (Centre d'Economie de la Sorbonne - Paris School of Economics) |
| Abstract: | This note characterizes the optimal base for commodity taxation in the presence of administrative fixed costs varying across goods. For low tax rates, the optimal base comprises all commodities whose discouragement index is greater than the ratio of their administrative costs to the tax they yield. |
| Keywords: | Indirect taxation, VAT, tax base, administrative costs. |
| JEL: | H21 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:11060&r=acc |
| By: | Andras Simonovits (Institute of Economics of the Hungarian Academy of Sciences also Institute of Mathematics, Budapest University of Technology and Economics also Department of Economics, CEU) |
| Abstract: | We analyze the impact of (exogenous) tax morale on the optimal design of progressive income taxation. In our model, only universal basic income (transfer) is financed from a linear income tax and the financing of public goods is neglected. Each individual supplies labor and (un)declares earning, depending on his labor disutility and tax morale, respectively. Limiting the utilitarianism to the poorer parts of the population (defined by the welfare share), the optimal tax rate is an increasing function of the tax morale and a decreasing function of the welfare share. |
| Keywords: | tax morale, progressive income tax, undeclared earning, labor supply, income redistribution |
| JEL: | H21 H26 H41 D58 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1137&r=acc |
| By: | Peter Hull (Federal Reserve Bank of New York); Masami Imai (Department of Economics, Wesleyan University) |
| Abstract: | We investigate the economic impacts of bank taxation on the value of banks and that of borrowing firms, exploiting the surprise announcement of a tax by the Tokyo metropolitan government as a natural experiment. We find that the tax announcement had broad effects on the share prices of banks, although the effects are stronger for a subset of soon-to-be taxed banks. However, the adverse effects of the tax on bank borrowers, although statistically significant, turn out to be quantitatively small (a half of the effects on bank share prices). These results suggest that the adverse economic consequence of bank taxation is felt primarily on banks themselves. |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:wes:weswpa:2011-005&r=acc |
| By: | Egger, Peter; Keuschnigg, Christian; Merlo, Valeria; Wamser, Georg |
| Abstract: | This paper develops a theoretical model of multinational firms with an internal capital market. Main reasons for the emergence of such a market are tax avoidance through debt shifting and the existence of institutional weaknesses and financial frictions across host countries. The model serves to derive hypotheses regarding the role of local versus foreign characteristics such as profit tax rates, lack of institutional quality, financial underdevelopment, and productivity for internal debt at the level of a given foreign affiliate. The paper assesses hypotheses in a panel data-set covering the universe of German multinational firms and their internal borrowing. Numerous novel insights are gained. For instance, the tax-sensitivity in this data-set is many times higher than common wisdom would suggest. This accrues mainly to the non-selectivity of the sample at hand. Moreover, local and foreign (at other locations of a given affiliate) market conditions matter more or less symmetrically and in the opposite direction. There is a nonlinear trade-off between institutional quality or financial development on the one hand and higher profit tax rates on the other hand, and the strength of this trade-off depends on the characteristics of one location relative to the other locations a multinational firm has affiliates (or the parent company) in. |
| Keywords: | Internal capital market, Debt shifting, Multinational firms, Firm-level data, Microeconometrics. |
| JEL: | H25 F23 G32 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:usg:econwp:2011:42&r=acc |
| By: | Ossi Korkeamäki |
| Abstract: | In this paper I evaluate the effects of a regional experiment that reduced payroll-taxes by 3–6 percentage points of the firm’s wage sum in Northern and Eastern Finland. I estimate the effect of the payroll-tax reduction on firms’ employment, wage sum and profits, and on workers hourly pay and monthly hours worked, by comparing employment and wage changes before and after the start of the experiment to a control region. According to my results, the reduction in the payroll-taxes did not lead to any clear cut aggregate effects in the target region. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa11p898&r=acc |
| By: | Tatom, John |
| Abstract: | Changes in the general level of prices and inflation have profound effects on asset prices. There are several reasons for these effects and the influence differs depending on the source of the inflation and whether it is expected or not. To understand these effects it is important to clarify what is meant by inflation, the pure theory of the sources of inflation, how inflation affects goods and services prices and how it affects the assets that are used to finance production, both equity prices and fixed income assets. This article reviews the theory of inflation, its sources and effects on asset prices, especially equity, bond and real asset prices. The simplest and broadest economic model suggests that money is a veil and that changes in its value (the price level and its rate of depreciation (inflation) have no real effect s on the economy, especially asset prices and real rates of return on assets. There are a variety of reasons to expect that inflation is not “neutral,” however. This article focuses on several factors that give rise to real adverse effects of inflation on asset prices, including supply shocks that reduce wealth and raise prices, and tax effects of inflation that arise from a lack of full indexation of the tax system. Inflation has had large effects on asset prices in the United States, especially during the Great Inflation from 1965 to 1984. The evidence here supports these sources of real effects of inflation. |
| Keywords: | Inflation; asset prices; supply shocks; real rate of interest; real rate of return on equity |
| JEL: | E31 E44 G0 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34606&r=acc |
| By: | Findeisen, Sebastian (University of Zurich); Sachs, Dominik (University of Konstanz) |
| Abstract: | We study optimal tax and educational policies in a dynamic private information economy, in which ex-ante heterogeneous individuals make an educational investment early in their life and face a stochastic wage distribution. We characterize labor and education wedges in this setting analytically and numerically, using a calibrated example. We present ways to implement the optimum. In one implementation there is a common labor income tax schedule, and a repayment schedule for government loans given out to agents during education. These repayment plans are contingent on loan size and income and capture the history dependence of the labor wedges. Applying the model to US-data and a binary education decision (graduating from college or not) we characterize optimal labor wedges for individuals without college degree and with college degree. The labor wedge of college graduates as a function of income lies first strictly above their counterparts from high-school, but this reverses at higher incomes. The loan repayment schedule is hump-shaped in income for college graduates. |
| Keywords: | optimal dynamic taxation, education, implementation |
| JEL: | H21 H23 I21 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6056&r=acc |