nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒01‒03
24 papers chosen by
Alexander Harin
Modern University for the Humanities

  1. International Financial Reporting Standards and banking regulation: A comeback of the state? By Grasl, Maximilian
  2. Harmonising Basel III and the Dodd Frank Act By Ojo, Marianne
  3. Quality of taxation and the crisis: Tax shifts from a growth perspective By Doris Prammer
  4. The elasticity of taxable income of high earners: Evidence from Hungary By Áron Kiss; Pálma Mosberger
  5. How much can corporate tax reduction contribute to economic recovery, employment and feedback of tax revenue? By Kazuki Hiraga
  6. Elasticité des bases fiscales (composées des profits des sociétés)en Europe. By Nicolas Chatelais
  7. Optimal tax enforcement under prospect theory By Gwenola Trotin; Amedeo Piolatto
  8. The effect of taxation on informal employment: evidence from the Russian flat tax reform By Slonimczyk, Fabian
  9. Undeclared economic activity in central and eastern Europe -- how taxes contribute and how countries respond to the problem By Leibfritz, Willi
  10. Optimal Piecewise Linear Income Taxation By Patricia Apps; Ngo Van Long; Ray Rees
  11. Determining the motives for a positive optimal tax on capital By William B. Peterman
  12. Tax morale and compliance : review of evidence and case studies for Europe By Torgler, Benno
  13. Environmental Tax and the Distribution of Income among Heterogeneous Workers By Mireille Chiroleu-Assouline; Mouez Fodha
  14. Tax morale, eastern Europe and European enlargement By Torgler, Benno
  15. Den politiska moms-debatten i Sverige efter 1990 Ett bidrag till studiet av skattereformers politiska hållbarhet By Johansson, Peter
  16. Comportements stratégiques fiscaux des petits pays en Europe. By Nicolas Chatelais
  17. Accounting for dominance and submission: Disciplining building societies with accounting-based regulation, circa 1960. By Bernardo Batiz-Lazo; Masayoshi Noguchi
  18. A Macroeconomic Approach to Corporate Capital Structure By Mitsuru Katagiri
  19. Coordinating tax reforms in the poorest countries : can lost tariffs be recouped ? By Wagle, Swarnim
  20. "Gesell Tax" and Efficiency of Monetary Exchange By Martin Menner
  21. Income tax evasion dynamics: Evidence from an agent-based econophysics model By Pickhardt, Michael; Seibold, Goetz
  22. The effect of debt tax benefits on firm investment decisions By Addessi, William; Saltari, Enrico
  23. Taxing international emissions trading By Valeria Costantini; Alessio D'Amato; Chiara Martini; Maria Cristina Tommasino; Edilio Valentini; Mariangela Zoli
  24. Government, taxes and banking crises. By Hasman, Augusto; López, Ángel, L.; Samartín Sáenz, Margarita

  1. By: Grasl, Maximilian
    Abstract: The European Union began using accounting rules defined by an independent private sector regime as compulsory norms in 2005. Is the incorporation of these International Financial Reporting Standards (IFRS) into European law a viable solution to combine external technical expertise with principles of democratic governance? The current financial crisis has shown that the technical expertise of this standard-setting body alone does not sufficiently guarantee satisfactory policy outcomes: The pro-cyclical IFRS-accounting standards have come to be accused of exacerbating the extent of the financial write-offs, which cost an enormous amount of taxpayers' money. In consequence, these standards have lost their output legitimacy. Abandoning public competences and legitimate decision-making have not paid off. What does the global public do about this? As early as 2007 the three most important financial jurisdictions (U.S., EU, Japan) and the International Organization of Securities Commissions (IOSCO) urged the IASC Foundation to alter its governance structure in order to enhance public accountability of the International Accounting Standards Board (IASB). How has the relationship of independent but widely influential standard-setters and public authorities developed? While public authorities (especially from the EU) bemoan a loss of public governance in accounting-policy the IASB shows little will to abandon obtained competencies. Public authorities rather have to act strategically in order to retrieve competences within the interwoven field of international financial regulation. The analysis has implications for regime theory, European governance and global political economy of financial regulations. -- Die Europäische Union nutzt seit den Jahr 2005 die Regeln eines unabhängigen privatrechtlichen Gremiums als verbindliche Normen. Bietet diese Übertragung der International Financial Reporting Standards (IFRS) in das Europäische Recht einen geeigneten Weg, um vorhandene externe Expertise mit den Prinzipien demokratischer Governance zu vereinen? Die gegenwärtige Finanzkrise belegt, dass die technische Expertise eines Standardsetzungsgremiums alleine keine zufriedenstellenden policy-Ergebnisse garantiert: Den prozyklisch wirkenden IFRS-Rechnungslegungsregeln wird vorgeworfen, das Ausmaß der notwendigen Abschreibungen und damit die Kosten der Bankenrettung noch zusätzlich erhöht zu haben. In Folge dessen haben diese Standards ihre output-Legitimation verloren und die Abtretung der Regelungskompetenz in diesem Bereich seitens demokratisch legitimierter Institutionen hat sich nicht bewährt. Wie treten staatliche Institutionen diesem Problem gegenüber? Bereits im Jahre 2007 drängten die drei einflussreichsten Finanzmarkt-Jurisdiktionen (USA, EU und Japan) sowie die Internationale Organisation der Wertpapieraufsichtsbehörden (IOSCO) die IASC-Stiftung dazu ihre Governance-Struktur anzupassen, um dadurch Verantwortlichkeit des International Accounting Standards Board (IASB) gegenüber staatlichen Stellen zu verbessern. Wie haben sich nun die Beziehungen zwischen dem gleichermaßen unabhängigen wie einflussreichen Standardsetzungsgremium und staatlichen Autoritäten entwickelt? Durch die Finanzkrise wurde die Rolle des IASB zum Gegenstand hochrangiger Verhandlungen unter den G20-Mitgliedern. Während von staatlicher Seite (insbesondere von der EU) ein Steuerungsverlust in der Rechnungslegungspolitik beklagt wird, ist das IASB kaum dazu bereit bislang erlangte Kompetenzen aufzugeben. Vielmehr müssen staatliche Instanzen strategisch vorgehen, um innerhalb des stark verwobenen Geflechts von Zuständigkeiten auf dem Gebiet der internationalen Finanzmarktregulierung Steuerungskompetenzen zurückzuerlangen. Diese Analyse ist für die Regime-Theorie, die Fragen europäischer Governance und die politische Ökonomie der Finanzmarktregulierung von Bedeutung.
    Date: 2011
  2. By: Ojo, Marianne
    Abstract: This paper aims to highlight why the harmonization of two major legislative frameworks, namely, Basel III and the Dodd Frank Act, will contribute immensely to resolving future global as well as regional financial crises. More specifically, the paper also aims to highlight the significance and importance of addressing the main transmission channels of financial instability and systemic risks at micro and macro prudential level as well as the need for consideration and redress of the obstacles confronted by Basel III – with particular regards to the impediment imposed by the Dodd Frank Wall Street Reform and Consumer Protection Act.
    Keywords: Basel III; Dodd Frank; credit ratings; financial crises; regulation; financial stability; systemic risks
    JEL: E02 K2 G2 D8 G01
    Date: 2011–12–19
  3. By: Doris Prammer (European Commission)
    Abstract: One aim of consolidation after the crisis on the taxation side is to curb growth as little as possible. Economic literature suggests that some tax systems are more conducive to growth, in particular those relying on consumption, environmental and property taxation. This paper reflects on behavioural responses of economic agents to taxation and reviews the literature on the impact of tax structures on growth. Furthermore, it analyses the tax structure in the EU-27 Member States and assess if the crises has triggered a move towards tax systems more conducive to growth.
    Keywords: financial crisis, tax efficiency, optimal taxation, tax structure, tax shift
    JEL: H11 H21 H26 E62
    Date: 2011–12
  4. By: Áron Kiss (Magyar Nemzeti Bank (central bank of Hungary)); Pálma Mosberger (Central European University)
    Abstract: The paper studies how high-income taxpayers responded to the introduction of the ‘extraordinary tax on individuals’ in Hungary in 2007. The study is based on a panel of tax returns compiled by the Hungarian Tax Authority for the purposes of this study, containing information on 10 percent of tax-filers from 2005 and three subsequent years. We estimate the elasticity of taxable income with respect to the marginal net-of-tax rate and find that the taxable income of Hungarian high earners is moderately responsive to taxation: the estimated elasticity is about 0.2. This means that if the upper tax rate of the 2010 Hungarian tax system were increased by a small amount, the behavioral response of taxpayers would reduce the additional tax revenue by about 60 percent. We find evidence suggesting that the elasticity is a reflection of a labor supply response to the tax change on the intensive margin, and not a reflection of tax shifting, avoidance or evasion.
    Keywords: taxable income elasticity, personal income tax, tax avoidance
    JEL: H20 H24 H31 J22
    Date: 2011
  5. By: Kazuki Hiraga (Faculty of Economics, Keio University)
    Abstract: Recently, discussion of corporate tax reduction is hot political issue in Japan. Especially, some researchers and politicians insist on the reduction of corporate tax rate, following the fact of "Corporate tax paradox", which means that corporate tax revenue per Gross Domestic Product (GDP) has a negative correlation with effective corporate tax rate. However, quantitative effect of corporate tax reduction is unclear and the discussion of finance methods does not proceed. Therefore, we examine the quantitative effect of corporate tax reduction to employment, output and total tax revenue which is the cost of tax reduction. To analyze the effect of corporate tax reduction, we use Dynamic General Equilibrium (DGE) model and we use shooting algorithm to calculate the large corporate tax reduction (i.e. 5% or 20% corporate tax rate reduction). As a result, long-run effect of corporate tax reduction not only prompts to economic growth, but also increases total tax revenue, when financed by lump-sum transfer. Because current corporate tax rate is the right hand side of the Laffer curve. With respect to the magnitude of tax reduction, absolute impact of 20% reduction is much larger than that of 5%. But relative impact (i.e. multiplier effect of tax reduction) of 20% reduction is a little smaller than that of 5%. However, short-run effect is smaller than long-run one. In the short-run, since capital accumulation is insufficient, households decrease consumption and tax revenue.
    Date: 2011–11
  6. By: Nicolas Chatelais (Centre d'Economie de la Sorbonne)
    Abstract: In this paper, we pursue several goals ; we first check if the downward trend in corporate income tax rates in Europe reflects a strategy of tax competition, and not a "yardstick competition" in neighboring countries. We estimate the scale of fiscal externalities on neighboring countries in terms of taxable domestic resources outflows. Then, we discriminate the European countries according to their size in order to verify the theory of Bucovetsky (1991) and Wilson (1991) which predict a higher elasticity of tax bases in small countries. We use a panel of 25 European countries over the period 1995-2007 using tools from spatial econometrics. We show that the common trend to lower the corporate income tax rate can be partially explained by the existence of fiscal spillovers throw international flows of resources. Tax rates setting behaviors are interdependent and are evidences of tax competition in Europe.
    Keywords: Strategic interactions, tax behaviors, spatial econometrics, European Union, tax competition, small countries, tax base elasticity.
    JEL: E62 F21 F22 F23 H30 H32 H73 H77 R12
    Date: 2011–12
  7. By: Gwenola Trotin (EQUIPPE); Amedeo Piolatto (Universidad de Alicante)
    Abstract: Prospect Theory (PT) has become the most credited alternative to Expected Utility Theory (EUT) as a theory of decision under uncertainty. This paper characterizes the optimal income tax and audit schemes under tax evasion, when taxpayers behave as predicted by PT. We show that the standard EUT results keep holding under PT, under even weaker conditions. Under fair assumptions on the reference income and on the utility function of taxpayers, we show that the optimal audit probability function is non-increasing and the optimal tax function is nondecreasing and concave.
    Keywords: Tax evasion; Income tax enforcement; Prospect theory
    JEL: D81 H26 K42
    Date: 2011–12
  8. By: Slonimczyk, Fabian
    Abstract: The 2001 Russian tax reform reduced average tax rates for the personal income tax and the payroll or social tax. It also made the tax structure more regressive. Because individuals in the lower income bracket were for the most part not affected, it is possible to estimate the effects of the reform using a differences-in-differences approach. I study the effect of the reform on informal employment. Informality is defined using information on employment registration and self-employment. Applying parametric and semi-parametric techniques, I find evidence that the tax reform led to a significant reduction in the fraction of informal employees. Among the different forms of informality I study, the reform seems to have had the strongest effect on the prevalence of informal irregular activities. I also document stronger effects on individuals who benefited from the largest reductions in tax rates.
    Keywords: informal sector; entrepreneurship; tax reform; difference-in-difference; transition; Russia
    JEL: O17 J3 P2 H24
    Date: 2011
  9. By: Leibfritz, Willi
    Abstract: The paper examines the incentives and distortions created by tax policy and administration structures that motivate individuals to undeclare or under-declare work in the new EU member countries. It analyses the tax level and the tax structure"mix"of tax instruments, the special taxation regimes set up to attract workers and entrepreneurs back into the formal economy and how tax policies such as the introduction of a"flat tax"on income from labor and capital impacted workers and entrepreneurs in terms of formalizing work. It also attempts to gain some insight into the effectiveness of tax administration by comparing some input and output measures As non-tax factors can amplify the adverse effects of taxes on the labor market and reduce the effectiveness of tax reform, some of these other economic framework conditions are also discussed. This paper concludes by refining the main results and possible best practices for tackling undeclared work. The paper argues that the new EU member countries have had mixed success tackling undeclared work. While taxation matters, other underlying conditions for formal sector activity are also important. Addressing the problem of undeclared work therefore requires a broad policy approach with further improvements in tax policies, tax administration, and in general economic framework conditions for formal sector activity.
    Keywords: Taxation&Subsidies,Emerging Markets,Public Sector Economics,Debt Markets,Tax Law
    Date: 2011–12–01
  10. By: Patricia Apps; Ngo Van Long; Ray Rees
    Abstract: Given its signiÖcance in practice, piecewise linear taxation has received relatively little attention in the literature. This paper o§ers 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 Önd 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: 2011–12
  11. By: William B. Peterman
    Abstract: Previous literature demonstrates that in a computational life cycle model the optimal tax on capital is positive and large. Given the computational complexities of these overlapping generations models it is helpful to determine the relative importance of the economic factors driving this result. I highlight the impact of changing two common assumptions in a benchmark model that generates a large optimal tax on capital similar to the model in Conesa et al. (2009). First, the utility function is altered such that it implies an agent's Frisch labor supply elasticity is constant, as opposed to increasing, over his lifetime. Second, the government is allowed to tax accidental bequests at a separate rate from ordinary capital income. The main finding of this paper is that these two changes cause the optimal tax on capital to drop by almost half. Furthermore, I find that the welfare costs of adopting the high optimal tax on capital from the benchmark model in the model with the altered assumptions, which calls for a lower tax on capital, are equivalent to 0.35 percent of total lifetime consumption. Quantifying the impact of these assumptions in the benchmark model is important because the first has limited empirical evidence and the second, although included for tractability, confounds a motive for taxing capital with a motive for taxing accidental bequests.
    Keywords: Capital ; Taxation
    Date: 2011
  12. By: Torgler, Benno
    Abstract: This paper provides an overview of the literature on tax morale and tax compliance. Most of the material here is based on research that I have conducted together with my co-authors over the last 10 years. Europe has a dominant place in this paper. Sometimes results derived from other countries are discussed that could be relevant for Europe. The overall findings show the importance of accountability, democratic governance, efficient, and transparent legal structures and therefore trust within the society to enforce tax compliance and tax morale.
    Keywords: Taxation&Subsidies,Subnational Economic Development,Debt Markets,Emerging Markets,Tax Law
    Date: 2011–12–01
  13. By: Mireille Chiroleu-Assouline (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne); Mouez Fodha (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne)
    Abstract: This paper analyzes the environmental tax policy issues when labor is heterogeneous. The objective is to assess whether an environmental tax policy could be Pareto improving, when the revenue of the pollution tax is recycled by a change in the labor tax properties. We show that, depending on the heterogeneity characteristics of labor and on the initial structure of the tax system, a policy mix could be designed in order to leave each class of workers unharmed. It consists of an increase in progressivity together with a decrease in the flat rate component of the wage tax.
    Keywords: Environmental tax ; Heterogenous agents ; Welfare analysis ; Tax progressivity
    Date: 2011–11
  14. By: Torgler, Benno
    Abstract: This study tries to remedy the current lack of tax compliance research analyzing tax morale in 10 Eastern European countries that joined the European Union in 2004 or 2007. By exploring tax morale differences between 1999 and 2008, it shows that tax morale has decreased in 7 out of 10 Eastern European countries. This lack of sustainability may support the incentive based conditionality hypothesis that the European Union only has a limited ability to influence tax morale over time. The author observes that events and processes at the country level are crucial to understanding tax morale. Factors such as perceived government quality and trust in the justice system and the government are positively correlated with tax morale in 2008.
    Keywords: Taxation&Subsidies,Debt Markets,Subnational Economic Development,Emerging Markets,National Governance
    Date: 2011–12–01
  15. By: Johansson, Peter (Institute for Futures Studies)
    Abstract: This working paper presents a historical study on the Swedish parliamentary debate with the purpose to enhance our understanding of the increasing deviations from the VAT tax-norm during the investigated period of time. The central question concerns why the Swedish Parliament – in contrast to the intentions of the tax reform of 1990/91 - has chosen increased tax rate differentiation over a general reduction of the VAT tax rate. No clear differences are found with respect to the general ambition of political par-ties to differentiate the tax rate. It is however possible to detect differences with respect both to how political parties have prioritized between different areas of the economy and their arguments for differentiation. This supports a conclusion where politics matter in tax policy and where VAT policy is a contentious matter on how to redistribute re-sources within the economy. The reason why all parties have promoted differentiation is interpreted and discussed from an institutional point of view. In particular the interplay of the European VAT Directive and rules on how to account for tax expenditures in the budget process are discussed.
    Keywords: VAT tax-norm; the tax reform of 1990/91; increased tax rate differentiation; the Swedish parliamentary debate
    JEL: E62
    Date: 2011–12–20
  16. By: Nicolas Chatelais (Centre d'Economie de la Sorbonne)
    Abstract: This paper contribtes to the small empirical literature dealing with strategic tax behaviors of small EU countries. We estimate tax reaction functions of national governments competing with each other. Deriving a simple model of tax competition in a Nash and Stackelberg framework, we use panel data and tools from spatial econometrics to test the role of small countries in the tax competition within the enlarged European Union. We find that interactions are stronger among small countries of the EU than between large ones and tax rates set by small countries have influence on those set in large countries. Finally, small countries close to the center of the EU have more influence on the choice of tax policies in other countries than the small peripheral countries.
    Keywords: European Union, non-cooperative behaviors, tax competition, small countries, spatial econometrics, tax reaction function.
    JEL: E62 F21 F22 F23 H30 H32 H73 H77 R12
    Date: 2011–12
  17. By: Bernardo Batiz-Lazo (School of Social Sciences, University of Manchester, UK); Masayoshi Noguchi (Research Institute for Economics and Business Administration, Kobe University)
    Abstract: This paper examines how accounting-based regulation modified the operation of one type of participant in British retail finance. Specifically, the House Purchase and Housing Act, 1959 and Building Societies Act, 1960 gave the Registrar of Friendly Societies new powers of intervention and these were used to discipline building societies revealing inadequate use of their funds. Although only a tiny fraction of existing societies were ultimately sanctioned, they all observed important deviations from specified accounting-based criteria that were generally recognized as financially sound within the industry. Intervention, however, was also motivated by two other factors: the successful lobbying by the Building Society Association to discipline non-members; and attempts by the Registrar to stop property developers from abusing moribund London-based societies. Results provide enough evidence to suggest that other studies' assessment that managers of British retail financial intermediaries disregarded accounting information in executive decisions need to be revised in light of the fact that the accounting control of building societies was supplemented by the disciplinary power granted to state regulators (as represented by the Treasury and the Registrar of Friendly Societies).
    Keywords: accounting-based regulation; House Purchase and Housing Act, 1959; Building Societies Act, 1960; Chief Registrar of Friendly Societies; HM Treasury; the Building Societies Association; disciplinary power; reserve ratio; property developers.
    Date: 2011–12
  18. By: Mitsuru Katagiri (Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail:
    Abstract: In this paper, I investigate the cross-sectional determinants of corporate capital structure using a general equilibrium model with endogenous firm dynamics, a realistic tax environment, and financial frictions. I find that the equilibrium firm distribution in the model replicates fairly well the distribution of corporate capital structure as well as the relationship between capital structure, profitability, and firm size in the data. The key mechanisms here are economies of scale and two types of productivity shocks: persistent and transitory. The counterfactual experiment using the model implies, among other things, that tax benefits have relatively small effects on corporate capital structure choice compared with default costs and the costs of outside equity, including the dividend tax. It also reveals that the effects of those frictions on corporate capital structure choice are highly interrelated with each other.
    Keywords: Corporate Capital Structure, Dynamic Trade-off Theory, Heterogeneous Firm Model
    JEL: G32 G31 E22
    Date: 2011–12
  19. By: Wagle, Swarnim
    Abstract: A revenue-neutral switch from trade taxes to domestic consumption taxes is fraught with implementation challenges in countries with a large informal sector. It is shown for a sample of low-income countries over 25 years that they have had a mixed record of offsetting reductions in trade tax revenue. The paper then analyzes the specific case of Nepal, using a unique data set compiled from unpublished customs records of imports, tariffs and all other taxes levied at the border. It estimates changes to revenue and domestic production associated with two sets of reforms: i) proportional tariff cuts coordinated with a strictly enforced value-added tax; and ii) proposed tariff cuts under a regional free trade agreement. It is shown that a revenue-neutral tax reform is conditional on the effectiveness with which domestic taxes are enforced. Furthermore, loss of revenue as a result of intra-regional free trade can be minimized through judicious use of Sensitive Lists that still cover substantially all the trade as required by Article XXIV of the GATT.
    Keywords: Debt Markets,Trade Policy,Economic Theory&Research,Free Trade,International Trade and Trade Rules
    Date: 2011–12–01
  20. By: Martin Menner (Universidad de Alicante)
    Abstract: A periodic "Gesell Tax" on money holdings as a way to overcome the zero-lower-bound on nominal interest rates is studied in a framework where money is essential. For this purpose, I characterize the efficiency properties of taxing money in a full-fledged macroeconomic business cycle model of the third-generation of monetary search models. Both, inflation and "Gesell taxes" maximize steady state capital stock, output, consumption, investment and welfare at moderate levels. The Friedman rule is sub-optimal, unless accompanied by a moderate “Gesell tax”. In a recession scenario a Gesell tax speeds up the recovery in a similar way as a large fiscal stimulus but avoids "crowding out" of private consumption and investment.
    Keywords: monetary search-theory, negative interest rates, Gesell tax, capital formation, DSGE model
    JEL: D83 E19 E32 E49
    Date: 2011–12
  21. By: Pickhardt, Michael; Seibold, Goetz
    Abstract: We analyze income tax evasion dynamics in a standard model of statistical mechanics, the Ising model of ferromagnetism. However, in contrast to previous research, we use an inhomogeneous multi-dimensional Ising model where the local degrees of freedom (agents) are subject to a specific social temperature and coupled to external fields which govern their social behavior. This new modeling frame allows for analyzing large societies of four different and interacting agent types. As a second novelty, our model may reproduce results from agent-based models that incorporate standard Allingham and Sandmo tax evasion features as well as results from existing two-dimensional Ising based tax evasion models. We then use our model for analyzing income tax evasion dynamics under different enforcement scenarios and point to some policy implications. --
    Keywords: tax evasion,tax compliance,Ising Model,econophysics,numerical simulation
    JEL: H26 O17 C15
    Date: 2011
  22. By: Addessi, William; Saltari, Enrico
    Abstract: In this paper we question the idea that the deduction of debt interest is always an effective policy instrument to spur firm investment. We analyze the investment decision in presence of a borrowing constraint on the amount of the debt that the firm can raise. We show that if the debt interest rate is decreasing in the firm capital accumulation and it is available another financial resource more expensive than debt (at least for levels of debt lower than the upper bound), then the deduction of the debt interest from taxes on capital income may reduce firm investment. This theoretical result should be considered when financial intermediaries are not willing to finance beyond a certain threshold but firms have access to other sources of finance.
    Keywords: Corporate taxation; Financing constraints; Investment
    JEL: D21 G31 H32
    Date: 2011–12–17
  23. By: Valeria Costantini; Alessio D'Amato; Chiara Martini; Maria Cristina Tommasino; Edilio Valentini; Mariangela Zoli
    Abstract: Most tradable permit regimes have ignored the role of emission allowance taxation whereas the OECD and the European Union have emphasized the need for further investigation of the related efficiency and effectiveness consequences. The aim of our paper is to take a first step in this direction. We illustrate a theoretical model featuring I representative competitive firms/countries. Our theoretical results show that accounting for permit taxation implies a distortion in the equilibrium price as well as an impact on emissions distribution across countries. The specific features of these distortions are then investigated through a Computable General Equilibrium model in which several options for taxes on net sellers’ permit revenues and defiscalization of net buyers’ permit costs are simulated. Welfare analysis is performed, suggesting that the design of permit taxation is relevant in determining how welfare gains and losses are distributed across countries.
    Keywords: international emissions trading, permit taxation, computable general equilibrium
    JEL: H23 Q58
    Date: 2011–12
  24. By: Hasman, Augusto; López, Ángel, L.; Samartín Sáenz, Margarita
    Abstract: This paper analyzes the effectiveness of different government policies to prevent the emergence of bank ing crises. In particular, we study the impact on welfare of using taxpayers money to recapitalize banks, government injection of money into the banking system through credit lines, the creation of a buffer and taxes on financial transactions (the Tobin tax). We illustrate the trade off between these policies and derive policy implications.
    Keywords: Banking crises; Information induced bank runs; Government policies; Taxes;
    Date: 2011

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