nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2011‒11‒21
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Optimal Tax Base with Administrative fixed Costs By Stéphane Gauthier
  2. A Panel Data Econometric Study of Corporate Tax Revenue in European Union: Structural, Cyclical Business and Institutional Determinants By Marta Rodrigues Monteiro; Elísio Fernando Moreira Brandão; Francisco Vitorino da Silva Martins
  4. America’s unreported economy: measuring the size, growth and determinants of income tax evasion in the U.S. By Feige, Edgar L.; Cebula, Richard
  5. US Excise Tax Horizontal Interdependence: Yardstick vs. Tax Competition By Leonzio Rizzo; Alejandro Esteller - Moré
  6. State Mineral Production Taxes and Mining Law Reform By John Dobra; Matt Dobra
  7. Organised VAT fraud: features, magnitude, policy perspectives By Fabrizio Borselli
  8. The Impact of Working Capital Management upon Companies’ Profitability: Evidence from European Companies By Joana Filipa Lourenço Garcia; Francisco Vitorino da Silva Martins; Elísio Fernando Moreira Brandão

  1. By: Stéphane Gauthier (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    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.
    Date: 2011–10
  2. By: Marta Rodrigues Monteiro (Faculdade de Economia, Universidade do Porto); Elísio Fernando Moreira Brandão (Faculdade de Economia, Universidade do Porto); Francisco Vitorino da Silva Martins (Faculdade de Economia, Universidade do Porto)
    Abstract: This paper studies the economic determinants of corporate tax revenue to Gross Domestic Product (GDP) across European Union members over the period 1998-2009. The Feasible Generalized Least Squares (FGLS) regression results suggest that structural, cyclical, international and institutional factors such as GDP, Government Deficit, Industry Turnover, Unemployment, Number of Enterprises, Trade Openness, Foreign Direct Investment (FDI) and Corruption affect revenue performance of an economy. Thus, the findings show that Unemployment Rate and Corruption have an adverse effect on tax collection, while the other analysed factors contribute to a better performance concerning tax collection. In the present paper we also consider as explanatory factors the tax variables Effective Average Tax Rate (EATR) and Effective Marginal Tax Rate (EMTR). In fact, empirical results indicate a parabolic relationship between EMTR and corporate tax revenues, reinforcing the hypothesis of the existence of a Laffer curve. Our findings also suggest that the last two years of European Union enlargement are likely not to have had effect in corporate tax revenue to GDP. In addition, specific factors of some countries (Greece, Portugal and Spain) seem to positively affect corporate revenues.
    Keywords: Corporate Tax Revenue, EATR, EMTR, Corruption, Laffer Curve
    JEL: H25 H26
    Date: 2011–11
  3. By: Kazuki Onji
    Abstract: A consolidated filing of corporate income tax may induce firms to manipulate ownership interests in subsidiaries but no study has systematically examined such behavioral responses. This paper examines empirically inclusions/exclusions of subsidiaries to/from consolidation groups in a quasi-experiment that utilizes the Japanese tax reform of 2002. The identification of tax effects is based on a difference-in-difference strategy that exploits disincentives to consolidate subsidiaries with losses carried forward. The data consists of 37,000-40,000 subsidiary-time observations spanning biennially over 1988-2006. The result shows that losses carried forward significantly reduced the propensity to include subsidiaries to consolidation groups. No evidence on tax-motivated exclusion is found. This result suggests that the forced consolidation regime is preferable.
    JEL: G34 H25 K34
    Date: 2011
  4. By: Feige, Edgar L.; Cebula, Richard
    Abstract: Abstract This study empirically investigates the extent of noncompliance with the tax code and examines the determinants of federal income tax evasion in the U.S. Employing a refined version of Feige’s (1986; 1989) General Currency Ratio (GCR) model to estimate a time series of unreported income as our measure of tax evasion, we find that 18-23 % of total reportable income may not properly be reported to the IRS. This gives rise to a 2009 “tax gap” in the range of $390-$537 billion. As regards the determinants of tax noncompliance, we find that federal income tax evasion is an increasing function of the average effective federal income tax rate, the unemployment rate, the nominal interest rate, and per capita real GDP, and a decreasing function of the IRS audit rate. Despite important refinements of the traditional currency ratio approach for estimating the aggregate size and growth of unreported economies, we conclude that the sensitivity of the results to different benchmarks, imperfect data sources and alternative specifying assumptions precludes obtaining results of sufficient accuracy and reliability to serve as effective policy guides.
    Keywords: Unreported economy; Underground economy; tax evasion; tax gap; noncompliance; income tax evasion; currency demand approach; currency ratio models
    JEL: O17 E52 E26 H26 E41
    Date: 2011–09
  5. By: Leonzio Rizzo; Alejandro Esteller - Moré
    Abstract: US excise tax rates are state interdependent. For example, a one-cent increase in the cigarette tax rate implies a contemporaneous cigarette tax increase of 0.18 cents in the neighboring state, while in the case of gasoline taxation the reaction to the same rise is just 0.11 cents. However, identifying the source of this interaction is key to its normative assessment. Our empirical analysis – spanning the period 1992 to 2006 – finds that interdependence in the case of gasoline taxation is driven just by the (fear of) base mobility. By contrast, in the case of cigarette taxation, it is politically driven: only states with non-term limited governors react (providing evidence of yardstick competition), especially as the election year approaches. Additionally, cigarette taxes tend to be lower when the election year approaches, but again only under non-term limited governors, while the existence of smokers in the state tends to reduce the level of cigarette taxation independently of the electoral cycle and of the presence of a term limited governor.
    Keywords: vertical tax competition; yardstick competition; termlimit; election year
    JEL: H71 H77
    Date: 2011–11–11
  6. By: John Dobra (Department of Economics, University of Nevada, Reno); Matt Dobra (University of Maryland University College)
    Abstract: Fuel and leasable minerals mined in the United States have historically been subject to federal royalties while locatable minerals have not. In recent years there have been multiple attempts to alter this policy and subject locatable minerals to federal royalties as well; most recently the preliminary 2011 Obama budget included a gross royalty on hard-rock mining on public lands. This paper analyzes the issue of imposing such federal royalties from both a legal and economic perspective. From a legal perspective, it is argued that the state of western property rights precludes royalties on currently extant claims so revenues from a royalty would not be realized for many years. From an economic perspective, it is argued that the effect on revenue would be smaller than one might anticipate due to such a royalty crowding out state levies or encouraging vertical disintegration on the part of mining firms to avoid much of the burden of the royalty.
    Keywords: mining, taxation, royalties
    Date: 2011–11
  7. By: Fabrizio Borselli (Banca d'Italia)
    Abstract: The European Union’s VAT system has become vulnerable to organised fraud schemes. In recent years, these schemes, undergoing a change in structure, have affected services and imports of goods from third countries and may also have shifted trade in goods among EU countries. Within the EU-27, organised VAT fraud is estimated to amount to between €20 billion and €35 billion a year. The EU institutions and Member States have put forward several measures to tackle this problem, although some of these have placed a disproportionate burden on businesses. The article shows that need to maximise the effectiveness of anti-VAT-fraud strategy cannot be separated from a broad view of the problem and of the functioning of the VAT system as a whole. A drastic change in the VAT system might provide a robust defence against fraud but produce uncertain effects. Enhancing risk management and exchange of good practices is essential. Technology-based solutions appear to be a pragmatic and politically feasible approach to new challenges, with good prospects of success.
    Keywords: VAT, tax evasion, fraud
    JEL: H21 H26 K34
    Date: 2011–10
  8. By: Joana Filipa Lourenço Garcia (Faculdade de Economia, Universidade do Porto); Francisco Vitorino da Silva Martins (Faculdade de Economia, Universidade do Porto); Elísio Fernando Moreira Brandão (Faculdade de Economia, Universidade do Porto)
    Abstract: Companies can use working capital management as an approach to influence their profitability. This paper studies the impact of working capital management and its components upon the profitability of European companies. Cash Conversion Cycle is used as a comprehensive measure for working capital management and Gross Operating Profitability used as a measure for profitability. This study is based on a sample of 2,974 non - financial companies listed in 11 European Stock Exchanges for a period of 12 years: 1998 - 2009. The results of GLS and OLS regression analysis found a significant negative relationship between Receivables Collection Period, Inventory Conversion Period, Payables Deferral Period, Cash Conversion Cycle and profitability. This suggests that companies can improve their profitability by reducing the time span during which working capital is tied up within the company. An inverse relationship between liquidity measured by Current Ratio and profitability was also found and an additional analysis revealed that different levels of liquidity lead to differentiated impacts of the Cash Conversion Cycle upon operating profitability.
    Keywords: Working Capital Management, Corporate Profitability, Cash Conversion Cycle, European Countries
    Date: 2011–11

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