nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒02‒01
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Optimal top marginal tax rates under income splitting for couples By Bach, Stefan; Corneo, Giacomo; Steiner, Viktor
  2. Sharing the burden: Empirical evidence on corporate tax incidence By Dwenger, Nadja; Rattenhuber, Pia; Steiner, Viktor
  3. Output taxation by a revenue-raising government under signaling By Manel Antelo
  4. The effect of endogenous human capital accumulation on optimal taxation By William B. Peterman
  5. Importing Corruption Culture from Overseas: Evidence from Corporate Tax Evasion in the United States By Jason M. DeBacker; Bradley T. Heim; Anh Tran
  6. Financial transaction tax: review and assessment By Jürgen Antony; Michiel Bijlsma; Adam Elbourne; Marcel Lever; Gijsbert Zwart
  7. How Should Financial Intermediation Services be Taxed? By Lockwood, Ben
  8. Audit pricing in a reformed nonprofit market By Verbruggen, Sandra; Christiaens, Johan; Reheul, Anne-Mie; Van Caneghem, Tom
  9. Identification of Preferences and Evaluation of Income Tax Policy By Charles F. Manski
  10. Auditor choice in the Belgian nonprofit sector: a behavioral perspective By Reheul, Anne-Mie; Van Caneghem, Tom; Verbruggen, Sandra

  1. By: Bach, Stefan; Corneo, Giacomo; Steiner, Viktor
    Abstract: This paper provides formulas for optimal top marginal tax rates when couples are taxed according to income splitting between spouses, consumption is taxed, and the skill distribution is unbounded. Optimal top marginal income tax rates are computed for Germany using a dataset that includes the tax returns of all German top taxpayers. We find that the optimal top marginal tax rate converges to about 2/3 and convergence obtains at income levels that are substantially higher than those currently subject to the actual top tax rate. --
    Keywords: optimal income taxation,top incomes,German income tax
    JEL: D31 D72 H23
    Date: 2011
  2. By: Dwenger, Nadja; Rattenhuber, Pia; Steiner, Viktor
    Abstract: This study assesses the burden of capital income tax passed onto labor through wage bargaining over economic rents, using estimations based on a unique pseudo-panel data set from Germany for the period 1998 to 2006. Tax return data cover the universe of corporations subject to corporate income tax, and labor market variables reflect the full record of employees covered by Social Security. We find that wage bargaining after a reduction in tax rates does not increase the wage bill if employment effects neglected by previous empirical studies are taken into account. Any increase in the total wage bill by higher wage rates set is equally compensated for by lower levels of employment. If adjustments in employment due to the increased user cost of capital are taken into account, a cut in corporate income taxes by 1 euro increases the wage bill by 0.47 euro. The identification of these effects comes from variation in the firm-specific average corporate tax rate across firms and over time resulting from two substantial tax reforms. The endogeneity of the firmspecific tax rate is controlled for by an instrumental variable approach. The instrument for the observed average tax rate is the counterfactual tax rate that a corporation would have faced in a particular period, had there been no endogenous change of its tax base, constructed using a detailed microsimulation model. --
    Keywords: tax incidence,wage determination,corporate income taxation,corporate tax return data
    JEL: H22 H25 J21 J31 H32
    Date: 2011
  3. By: Manel Antelo (Universidad de Santiago de Compostela)
    Abstract: In this paper the behavior of a tax-collecting government (a tax office) when imposing a quantity-tax to firms is analyzed along a two-period signaling model. Each taxpayer privately knows its technological attributes, while third parties—the tax office among them—have only a prior belief about this fact, so firms can be tempted to behave opportunistically. In monopoly, signaling is always costly in terms of output deviation and the tax office reacts by setting, a smaller tax in (asymmetric information) period 1 than it would under symmetric information. In oligopoly, signaling can be either costly or costless. In the former case, the tax imposed by the tax office to each firm is below that imposed under symmetric information, while it is equal in the latter case. Besides, fiscal revenue under signaling is unambiguously lower than under symmetric information, even when tax size is the same in both contexts
    Keywords: Output-tax, tax office, asymmetric information, signaling
    JEL: H21 D82
    Date: 2011
  4. By: William B. Peterman
    Abstract: This paper considers the impact of endogenous human capital accumulation on optimal tax policy in a life cycle model. Including endogenous human capital accumulation, either through learning-by-doing or learning-or-doing, is analytically shown to create a motive for the government to use age-dependent labor income taxes. If the government cannot condition taxes on age, then it is optimal to use a tax on capital in order to mimic such taxes. Quantitatively, introducing learning-by-doing or learning-or-doing increases the optimal tax on capital by forty or four percent, respectively. Overall, the optimal tax on capital is thirty five percent higher in the model with learning-by-doing compared to the model with learning-or-doing implying that how human capital accumulates is of significant importance when determining the optimal tax policy.
    Keywords: Capital ; Human capital ; Taxation
    Date: 2012
  5. By: Jason M. DeBacker; Bradley T. Heim; Anh Tran
    Abstract: This paper studies how cultural norms and enforcement policies influence illicit corporate activities. Using confidential IRS audit data, we show that corporations with owners from countries with higher corruption norms engage in higher amounts of tax evasion in the U.S. This effect is strong for small corporations and decreases as the size of the corporation increases. In the mid-2000s, the United States implemented several enforcement measures which significantly increased tax compliance. However, we find that these enforcement efforts were less effective in reducing tax evasion by corporations whose owners are from countries with higher corruption norms. This suggests that cultural norms can be a challenge to legal enforcement.
    JEL: D73 H25 M14
    Date: 2012–01
  6. By: Jürgen Antony; Michiel Bijlsma; Adam Elbourne; Marcel Lever; Gijsbert Zwart
    Abstract: <p>We explore whether a Financial Transactions Tax (FTT) is likely to correct the market failures that have contributed to the financial crisis, to what extent FTT succeeds in raising revenues, and how the FTT compares to alternative taxes in terms of efficiency.</p><p>We find little evidence that the FTT will be effective in correcting market failures. Taxing of transactions is not well targeted at behaviour that leads to excessive risk and systemic risk creation. The empirical evidence does not suggest that the introduction of an FTT reduces volatility or asset price bubbles. An FTT will likely raise significant revenues and we estimate those revenues for the Netherlands. In the short term, the incidence of the tax will be chiefly on the current holders of securities. Ultimately, the tax will be borne in part by end users, and we estimate the likely effects on economic growth. When compared to alternative forms of taxation of the financial sector, the FTT is likely less e  fficient given the amount of revenues. In particular, taxes that more directly address existing distortions, such as the current VAT exemption for banks, and the bias towards debt financing, provide more efficient alternatives.<br /> </p>
    JEL: G18 H21
    Date: 2012–01
  7. By: Lockwood, Ben (University of Warwick)
    Abstract: This paper considers the optimal taxation of savings intermediation and payment services in a dynamic general equilibrium setting, when the government can also use consumption and income taxes. When payment services are used in strict proportion to …nal consumption, and the cost of intermediation services is …xed and the same across …rms, the optimal taxes are generally indeterminate. But, when …rms di¤er exogenously in the cost of intermediation services, the tax on savings intermediation should be zero. Also, when household time and payment services are substitutes in transactions, the optimal tax rate on payment services is determined by the returns to scale in the conditional demand for payment services, and is generally di¤erent to the optimal rate on consumption goods. In particular, with constant returns to scale, payment services should be untaxed. These results can be understood as applications of the Diamond-Mirrlees production e¢ciency theorem. Finally, as an extension, we endogenize intermediation, in the form of monitoring, and show that it may be oversupplied in equilibrium when banks have monopoly power, justifying a Pigouvian tax in this case.
    Keywords: Financial intermediation services, tax design, banks, monitoring,payment services
    Date: 2011
  8. By: Verbruggen, Sandra (Hogeschool-Universiteit Brussel (HUB), Belgium); Christiaens, Johan (Ghent University, Department of Accounting and Corporate Finance); Reheul, Anne-Mie (Hogeschool-Universiteit Brussel (HUB), Belgium); Van Caneghem, Tom (Hogeschool-Universiteit Brussel (HUB), Belgium)
    Abstract: In contrast to the extant research on audit fees of for-profit companies, literature on non-profit audit fees is scant. In this paper, audit fee determinants of previous research are tested in a nonprofit market that is characterized by a relatively low dominance of Big4 auditors, low litigation risk, small nonprofit entities, high levels of subsidization and recent legislative reforms. Using OLS on a sample of nonprofit entities, we find that some known determinants such as auditor size and client complexity hold their ground. However, our findings on client profitability and auditor specialization show that refinements of audit fee models need to incorporate audit market characteristics, agency problems and signaling.
    Date: 2011–09
  9. By: Charles F. Manski
    Abstract: The merits of alternative income tax policies depend on the population distribution of preferences for income, leisure, and public goods. Standard theory, which supposes that persons want more income and more leisure, does not predict how they resolve the tension between these desires. Empirical studies of labor supply have been numerous but have not shed much light on the matter. A persistent problem is that empirical researchers have imposed strong preference assumptions that lack foundation. This paper examines anew the problem of inference on preferences and considers the implications for comparison of tax policies. I first perform a basic revealed-preference analysis that imposes no assumptions on the preference distribution beyond the presumption that persons prefer more income and leisure. This shows that observation of a person’s labor supply under a status quo tax policy may bound his labor supply under a proposed policy or may have no implications, depending on the shapes of the two tax schedules and the location of status quo labor supply. I next explore the identifying power of two assumptions restricting the population distribution of income-leisure preferences. One assumes that groups of persons who face different choice sets have the same distribution of preferences, while the other adds restrictions on the shape of this distribution. I then address utilitarian policy comparison with partial knowledge of preferences. Partial knowledge of preferences implies partial knowledge of the welfare function. Hence, it may not be possible to rank policies.
    JEL: C14 C25 H21 H24 J22
    Date: 2012–01
  10. By: Reheul, Anne-Mie (Hogeschool-Universiteit Brussel (HUB), Belgium); Van Caneghem, Tom (Hogeschool-Universiteit Brussel (HUB), Belgium); Verbruggen, Sandra (Hogeschool-Universiteit Brussel (HUB), Belgium)
    Abstract: This study investigates auditor choice in Belgian nonprofit organizations from a behavioral perspective. We investigate whether auditor choice in favor of an auditor with a high (versus low) level of sector specialization is associated with the importance that nonprofit organizations attach to six auditor attributes: competence/integrity/deontology, working relationship with management, audit fee, practical execution of the audit, client oriented analysis and suggestions, and sector expertise. It is important to understand the criteria underlying this choice as it has been revealed in the extant literature that auditor sector specialization improves audit quality and financial statement information. We find that nonprofit organizations attaching higher value to sector expertise and client oriented analysis and suggestions are significantly more likely to choose an auditor with a higher level of sector specialization. From this finding we derive a number of recommendations for the audit profession and for policy makers.
    Keywords: auditor choice; auditor sector specialization; nonprofit organizations; behavioral study; Belgium.
    Date: 2011–12

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