nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2011‒12‒19
nine papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Assessing the Variability of Tax Elasticities in Lithuania By Tigran Poghosyan
  2. The Use of Tax Havens in Exemption Regimes By Anna Gumpert; James R. Hines, Jr.; Monika Schnitzer
  3. JAPANESE FIRMS’ DEBT POLICY AND TAX POLICY By Kunieda, Shigeki; Takahata, Junichiro; Yada, Haruna
  4. Taxation and economic sustainability By Kalendiene, Jone; Pukeliene, Violeta
  5. What Has Happened to Marginal Tax Rates? By Callan, Tim; Crilly, Niamh; Keane, Claire; Walsh, John R.
  6. Bunching and Non-Bunching at Kink Points of the Swedish Tax schedule By Bastani, Spencer; Selin, Håkan
  7. From transfers to tax "co-occupation": the Italian reform of intergovernmental finance By Ernesto Longobardi
  8. Why Don’t We Tax the Rich? Inequality, Legislative Malapportionment, and Personal Income Taxation around the World By Martin Ardanaz; Carlos Scartascini
  9. How Would GASB Proposals Affect State and Local Pension Reporting? By Alicia H. Munnell; Jean-Pierre Aubry; Josh Hurwitz; Laura Quinby

  1. By: Tigran Poghosyan
    Abstract: This paper quantifies the variability of tax elasticities in Lithuania using two alternative methods: rolling regressions and pooled mean group estimator. The analysis is motivated by the systematic variation of tax revenues observed over the economic cycle in the recent past. Both methods confirm that tax elasticities moved with the cycle, which can be attributed to the procyclical tax compliance tendencies and structural composition effects across tax bases. Comparison of VAT revenue gaps across Baltic countries during the recent recovery suggests that tax revenues rebounded fastest in Estonia, followed by Lithuania and Latvia. Overall, the results of the study emphasize the importance of accounting for cyclical variation in tax elasticities when making short-term tax revenue projections.
    Keywords: Baltics , Business cycles , Cross country analysis , Direct taxation , Estonia , Indirect taxation , Latvia , Tax revenues , Tax systems , Value added tax ,
    Date: 2011–11–17
  2. By: Anna Gumpert; James R. Hines, Jr.; Monika Schnitzer
    Abstract: This paper analyzes the tax haven investment behavior of multinational firms from a country that exempts foreign income from taxation. High foreign tax rates generally encourage firms to invest in tax havens, though significant costs of reallocating taxable income dampen these incentives. The behavior of German manufacturing firms from 2002-2008 is consistent with this prediction: at the mean, one percentage point higher foreign tax rates are associated with three percentage point greater likelihoods of owning tax haven affiliates. This contrasts with earlier evidence for U.S. firms subject to home country taxation, which are more likely to invest in tax havens if they face lower foreign tax rates. Foreign tax rates appear to be unrelated to tax haven investments of German firms in service industries, possibly reflecting the difficulty they face in reallocating taxable income.
    JEL: F23 H87
    Date: 2011–12
  3. By: Kunieda, Shigeki; Takahata, Junichiro; Yada, Haruna
    Abstract: Understanding the effects of marginal tax rate on debt policy is crucial not only for considering various capital structure theories of firms but also for evaluating corporate tax reform proposals. In this empirical study, we have found a positive relation in most cases between the firm-specific marginal tax rates (simulated using the method of Shevlin (1990) and Graham (1996)) and the debt ratio increase of Japanese firms. This result shows that the marginal tax rates significantly affect the debt policies of Japanese firms. Corporate tax reform to produce equal treatment of equity and debt is desirable in Japan.
    Keywords: debt, capital structure, marginal tax rate, corporate tax
    JEL: G32 H25
    Date: 2011–12
  4. By: Kalendiene, Jone (Vytautas Magnus University,Kaunas,Lithuania); Pukeliene, Violeta (Vytautas Magnus University,Kaunas,Lithuania)
    Abstract: Macroeconomic theory says that taxes play a repressing role in the economy. Introduction of new forms of taxation, the increase of tax rates and augmentation of tax income of the Government puts a downturn risk on consumption and therefore on economic growth. Knowing that, Governments start to compete with other countries by lowering corporate tax rates and trying to boost economic growth by using foreign investments. On the other hand Governments are pushed to lower personal tax rates in order to satisfy their electorate. It was highly believed that countries with lower tax rates have better prospects for future growth. However, small tax income boundaries government spending and might cause serious imbalances in economy. As the Irish example shows smaller taxes cannot guarantee sustainable growth of the economy. So the taxation and economic development relationship needs rethinking. This paper aims to test the efficiency of taxation in sustainable economic development terms and to discuss the factors that are the most important. The comparative analysis of EU countries is used for the research.
    Keywords: Taxation; Economic Sustainability
    JEL: E60
    Date: 2011–05–30
  5. By: Callan, Tim; Crilly, Niamh; Keane, Claire; Walsh, John R.
    Keywords: taxes
    Date: 2011–11
  6. By: Bastani, Spencer (Uppsala Center for Fiscal Studies); Selin, Håkan (Uppsala Center for Fiscal Studies)
    Abstract: The compensated taxable income elasticity at a given income level is proportional to the number of individuals who bunch at a convex kink point. This holds true even in the presence of optimization frictions if the jump in marginal tax rates is suciently large. In this paper we estimate bunching of taxpayers at a very large kink point of the Swedish tax schedule. During the period of study the change in the log net-of-tax rate reached a maximum value of 45.6%. Interestingly, we nd no economically signi cant bunching of wage earners at this large kink. Self-employed individuals, on the other hand,display clear bunching, but the implied elasticities are not very large. Following Chetty (2011) we calculate an upper bound on the structural elasticity for wage earners consistent with our estimate. If wage earners on average tolerate 1% of their disposable income in optimization costs, the upper bound on the taxable income elasticity is 0.39. We also evaluate the performance of the bunching estimator by performing Monte Carlo simulations.
    Keywords: bunching; taxable income; bounds; optimization frictions
    JEL: H21 H42
    Date: 2011–12–12
  7. By: Ernesto Longobardi (Università di Bari)
    Abstract: The paper provides some insights into the current reform of the system of intergovernmental relations in Italy. A most relevant change is the abolition of transfers from a higher level of government as an ordinary means of finance for sub-central governments, with the exception of grants having an explicit equalisation purpose. Since the room for autonomous local taxes is quite narrow, transfers are going to be substituted, to a large extent, by different forms of "co-occupation" of central taxes. Using the OECD taxonomy about tax autonomy, it is shown that the effective increase in "infra-marginal" tax autonomy of sub-central governments brought about by the reform will be quite modest. At the margin, however, where autonomy really matters, there could be enough room for the exercise of effective discretion. The main problem is that both the central and the sub-central governments fear the decentralisation of tax power. The former because it feels that, at least in the transitional period, the electorate might not properly distinguish the different fiscal responsibilities; the latter because they would prefer not to tax their electorate, notwithstanding their preferences for more stable and predictable sources of finance with respect to the current system.
    Keywords: Intergovernmental finance, decentralisation, tax assignment, tax autonomy
    JEL: H71 H77
    Date: 2011–12
  8. By: Martin Ardanaz; Carlos Scartascini
    Abstract: Personal income taxation remains relatively low in many developing countries despite recent democratic advancement and rapid economic growth; this is hard to reconcile with standard political economy models of taxation. This paper argues that the details of political institutions help to explain these low levels of personal income taxation. In particular, legislative malapportionment enables rich elites to have disproportionate political influence. Because over-represented districts tend to be dominated by parties aligned with the elite, these groups can block legislative attempts to introduce progressive taxes. Using a sample of more than 50 countries (including 17 across Latin America) between 1990 and 2007, this paper finds that i) countries with historically more unequal distributions of wealth and income systematically present higher levels of legislative malapportionment, and ii) higher levels of malapportionment are associated with lower shares of personal income taxes in GDP.
    JEL: D70 D78 H24
    Date: 2011–11
  9. By: Alicia H. Munnell; Jean-Pierre Aubry; Josh Hurwitz; Laura Quinby
    Abstract: States and localities account for pensions in their financial statements according to standards laid out by the Governmental Accounting Standards Board (GASB). Under these standards, state and local plans generally follow an actuarial model and discount their liabilities by the long-term yield on the assets held in the pension fund, roughly 8 percent. Most econo­mists contend that the discount rate should reflect the risk associated with the liabilities and, given that benefits are guaranteed under most state laws, the appropriate discount factor is closer to the riskless rate. The point is not that liabilities should be larger or smaller, but rather that the discount rate should reflect the nature of the liabilities; the characteristics of the assets backing the liabilities are irrelevant.
    Date: 2011–11

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