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on Accounting and Auditing |
| By: | Ulf Brüggemann; Jörg-Markus Hitz; Thorsten Sellhorn |
| Abstract: | This paper discusses empirical evidence on the economic consequences of mandatory adoption of International Financial Reporting Standards (IFRS) in the European Union (EU) and provides suggestions on how future research can add to our understanding of these effects. Based on the explicitly stated objectives of the EU‟s so-called „IAS Regulation‟, we distinguish between intended and unintended consequences of mandatory IFRS adoption. Empirical research on the intended consequences generally fails to document an increase in the comparability or transparency of financial statements. In contrast, there is rich and almost unanimous evidence of positive effects on capital markets and at the macroeconomic level. We argue that certain research design issues are likely to contribute to this apparent mismatch in findings and we suggest areas for future research to address it. The literature investigating unintended consequences of mandatory IFRS adoption is still in its infancy. However, extant empirical evidence and insights from non-IFRS settings suggest that mandatory IFRS adoption has the potential to materially affect contractual outcomes. We conclude that both the intended and the unintended consequences deserve further scrutiny to assess the costs and benefits of mandatory IFRS adoption, which may help provide a basis for evaluating the effectiveness of the IAS Regulation. We provide specific guidance for future research in this field. |
| Keywords: | International accounting, IFRS adoption, economic consequences, contracting, regulation, review |
| JEL: | G38 K12 K22 K34 M41 M48 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2012-011&r=acc |
| By: | Stefano Cascino; Joachim Gassen |
| Abstract: | The mandatory adoption of IFRS by many countries worldwide fuels the expectation that financial accounting information might become more comparable across countries. This expectation is opposed to an alternative view that stresses the importance of incentives in shaping accounting information. We provide early evidence on this debate by investigating the effects of mandatory IFRS adoption on the comparability of financial accounting information around the world. Using two comparability proxies based on De Franco et al. [2011], our results suggest that the overall comparability effect of mandatory IFRS adoption is marginal at best. To investigate the reasons for this finding, we first hand-collect data on IFRS compliance for a sample of German and Italian firms and find that firm-, region-, and country-level incentives systematically shape accounting compliance. We then use the identified compliance incentives to explain the variance in the comparability effect of mandatory IFRS adoption and find it to vary systematically with firm-level incentives, suggesting that only firms with high compliance incentives experience substantial increases in comparability. |
| Keywords: | international accounting, IFRS, comparability, accounting harmonization, financial accounting compliance, reporting incentives |
| JEL: | M41 G14 F42 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2012-009&r=acc |
| By: | Jannis Bischof; Ulf Brüggemann; Holger Daske |
| Abstract: | At the peak of the financial crisis in October 2008, the IASB amended IAS 39 to grant companies the option of abandoning fair value recognition for selected financial assets. Using a comprehensive global sample of publicly listed IFRS banks, we find that banks use the reclassification option to forgo the recognition of fair value losses and ultimately the regulatory costs of supervisory intervention. Analyses of stock market reactions suggest that a small subset of the most troubled banks benefit from such reclassifications. However, analyses of related footnote disclosures reveal that two-thirds of reclassifying banks do not fully comply with the accompanying IFRS 7 requirements. These banks experience a significant increase in bid-ask spreads in the long run. |
| Keywords: | Bank Regulation, Fair Value Accounting, Financial Crisis, IAS 39, IFRS 7 |
| JEL: | G14 G21 G28 M41 M48 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2012-010&r=acc |
| By: | Frank M. Fossen; Martin Simmler |
| Abstract: | Tax competition for the mobile factor capital has led to a trend in many countries to levy lower taxes on interest income, often introducing differential taxation between interest and business income. In this study, we analyze the effect of such differential taxation on the debt ratio of firms. We exploit a 2009 tax reform in Germany as a quasi-experiment, which introduced a flat final withholding tax and opened a gap of 18 percentage points between the tax rate on income from unincorporated businesses and the new lower tax rate on interest income. We apply a regression adjusted semi-parametric difference-in-difference matching strategy based on firm level panel data. In addition, we implement a more structural approach with a tax rate differential, taking into account its endogeneity by using instrumental variables. The results indicate that firms increase their leverage when the tax rate on interest income decreases, albeit to a small degree. |
| Keywords: | Income taxation, capital taxation, financial structure, leverage, matching |
| JEL: | H25 H24 G32 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1190&r=acc |
| By: | Alexander Klemm; S. M. Ali Abbas; Junhyung Park; Sukhmani Bedi |
| Abstract: | This paper assembles a new dataset on corporate income tax regimes in 50 emerging and developing economies over 1996-2007 and analyzes their impact on corporate tax revenues and domestic and foreign investment. It computes effective tax rates to take account of complicated special regimes, such as partial tax holidays, temporarily reduced rates and increased investment allowances. There is evidence of a partial race to the bottom: countries have been under pressure to lower tax rates in order to lure and boost investment. In the case of standard tax systems (i.e. tax rules applying under normal circumstances), the effective tax rate reductions have not been larger than those witnessed in advanced economies, and revenues have held up well over the sample period. However, a race to the bottom is evident among special regimes, most notably in the case of Africa, creating effectively a parallel tax system where rates have fallen to almost zero. Regression analysis reveals higher tax rates adversely affect domestic investment and FDI, but do raise revenues in the short-run. |
| Keywords: | Corporate taxes , Cross country analysis , Developing countries , Emerging markets , Tax policy , Tax systems , |
| Date: | 2012–01–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:12/28&r=acc |
| By: | Stefania Marcassa; Fabrizio Colonna (THEMA, Universite de Cergy-Pontoise; Banca d'italia, Economic Structure and Labor Market Division.) |
| Abstract: | Italy has the lowest labor force participation of women among OECD countries. Moreover, the participation rate of married women is positively correlated to their husbands' income. We show that a high tax schedule together with tax credits and transfers raise the burden of two-earner house- holds, generating disincentives to work. We estimate a structural labor supply model for women, and use the estimated parameters to simulate the eects of alternative revenue-neutral tax systems. We nd that joint taxation implies a drop in the participation rate. Conversely, working tax credit and gender-based taxation boost it, with the eects of the former concentrated on low educated women. |
| Keywords: | female labor force participation, Italian tax system, second earner tax rate, joint taxa- tion, gender-based taxation, working tax credit JEL Classication: J21, J22, H31 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ema:worpap:2011-22&r=acc |
| By: | Mutascu, Mihai; Tiwari, Aviral; Estrada, Fernando |
| Abstract: | The present study is, in particular, an attempt to test the relationship between tax level and political stability by using some economic control variables and to see the relationship among government effectiveness, corruption, and GDP. For the purpose, we used the GMM (1991) and GMM system (1998), using a country-level panel data from 112 countries for the period 1997 to 2010. The main results show that political stability is not the key for the tax policy, under the control of political regime durability the taxes as percent in GDP having consistent sinusoidal tendency, by cubic type. |
| Keywords: | Taxation; Political Stability; Connection; Effects; GMM and GMM system |
| JEL: | B1 B4 H5 H2 H23 C1 D70 C14 C23 B16 D72 H3 B41 C2 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36855&r=acc |
| By: | Hiroyuki Kasahara; Katsumi Shimotsu; Michio Suzuki |
| Abstract: | To what extent does a tax credit affect firms' R&D activity? What are the mechanisms? This paper examines the effect of the 2003 Japanese tax credit reform on firms' R&D investment by exploiting cross-sectional variation across firms in the changes in the effective tax credit rate between 2002 and 2003. When we use the benchmark sample to estimate the first-difference equation between 2002 and 2003, our estimate for the elasticity of R&D investment with respect to the effective tax credit rate is 2.05% with a standard error of 0.60, and the estimated effect of the R&D tax credit on R&D investment is significantly larger for small firms with relatively large outstanding debts. When we use different methods and different samples, we find mixed evidence for the positive effect of the R&D tax credit, but an interaction term between the effective tax credit rate and the debt-to-asset ratio is always estimated to be significant for small firms, providing robust evidence for the role of financial constraint in determining the effect of the R&D tax credit. |
| Keywords: | R&D, Tax Credit, Fnancial Constraint, Japan |
| JEL: | D22 H25 H32 K34 O31 O38 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd11-220&r=acc |
| By: | M Gelber, Alexander (The Wharton School) |
| Abstract: | This paper examines the response of husbands' and wives' earnings to a tax reform in which husbands' and wives' tax rates changed independently, allowing me to examine the effect of both spouses' incentives on each spouse's behavior. I compare the results to those of more simplified econometric models that are used in the typical setting in which such independent variation is not available. Using administrative panel data on approximately 11% of the married Swedish population, I analyze the impact of the large Swedish tax reform of 1990-1. I find that in response to a compensated fall in one spouse's tax rate, that spouse's earned income rises, and the other spouse's earned income also rises. I test and reject a set of models in which the family maximizes a single utility function. A standard econometric specification, in which one spouse reacts to the other spouse's income as if it were unearned income, yields biased coefficient estimates. Uncompensated elasticities of earned income with respect to the fraction of income kept after taxes are over-estimated by a factor of more than three, and income effects are of the wrong sign. A second common specification, in which overall family income is related to the family's tax rate and income, also yields substantially over-estimated own compensated and uncompensated elasticities. Standard econometric approaches may substantially mis-estimate earnings responses to taxation. |
| Keywords: | taxation; earnings; labor supply; families; spouses; unitary model |
| JEL: | H21 H24 H31 J12 J16 J21 J22 |
| Date: | 2011–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uufswp:2012_004&r=acc |
| By: | Christina D. Romer; David H. Romer |
| Abstract: | This paper uses the interwar period in the United States as a laboratory for investigating the incentive effects of changes in marginal income tax rates. Marginal rates changed frequently and drastically in the 1920s and 1930s, and the changes varied greatly across income groups at the top of the income distribution. We examine the effect of these changes on taxable income using time-series/cross-section analysis of data on income and taxes by small slices of the income distribution. We find that the elasticity of taxable income to changes in the log after-tax share (one minus the marginal rate) is positive but small (approximately 0.2) and precisely estimated (a t-statistic over 6). The estimate is highly robust. We also examine the time-series response of available indicators of investment and entrepreneurial activity to changes in marginal rates. We find suggestive evidence of an impact on business formation, but no evidence of an important impact on other indicators. |
| JEL: | E62 H24 H31 N42 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17860&r=acc |
| By: | Swenson, David A. |
| Abstract: | This paper is a summary of the origins of Tax Increment Financing (TIF) and reforms to TIF based on economic and intergovernmental fiscal shifts during the 1980s. Iowa's modern TIF law is, as a result, very widely and indescriminantly used, leading to a call for reform of the core legislative authority. This paper is covers the testimony of David Swenson before the Iowa House Ways and Means subcommittee in February, 2012. |
| Date: | 2012–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:34935&r=acc |
| By: | Sonja Brangewitz (University of Paderborn); Sarah Brockhoff (University of Freiburg) |
| Abstract: | This paper analyzes the stability of capital tax harmonization agree- ments in a stylized model where countries have formed coalitions which set a common tax rate in order to avoid the inefficient fully non- cooperative Nash equilibrium. In particular, for a given coalition struc- ture we study to what extend the stability of tax agreements is affected by the coalitions that have formed. In our set-up, countries are sym- metric, but coalitions can be of arbitrary size. We analyze stability by means of a repeated game setting employing simple trigger strategies and we allow a sub-coalition to deviate from the coalitional equilib- rium. For a given form of punishment we are able to rank the stability of different coalition structures as long as the size of the largest coali- tion does not change. Our main results are: (1) singleton regions have the largest incentives to deviate, (2) the stability of cooperation de- pends on the degree of cooperative behavior ex-ante. |
| Keywords: | capital tax competition, tax coordination, coalitional equilibria, repeated game |
| JEL: | C71 C72 H71 H77 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:pdn:wpaper:48&r=acc |
| By: | Dirk Foremny (University of Bonn); Nadine Riedel (University of Hohenheim & Oxford University CBT & CESifo Munich) |
| Abstract: | The purpose of this paper is to assess whether politicians manipulate the timing of tax rate changes in a strategic way to maximize reelection prospects. To do so, we exploit the German local business tax as a testing ground which is set autonomously by German municipalities. As election dates vary across local councils, the data allows us to disentangle effects related to the timing of elections from common trends. Using a rich panel data-set for German municipalities, we assess the impact of elections on local business tax choices. The findings support the notion of a political cycle in tax setting behavior as the growth rate of the local business tax is significantly reduced in the election year and the year prior to the election, while it jumps up in the year after the election. This pattern turns out to be robust against a number of sensitivity checks. |
| Keywords: | Local business tax choice, political economy, election cycle |
| JEL: | H25 H71 D72 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2012/3/doc2012-3&r=acc |
| By: | Erik Alencar de Figueiredo; Cleiton Roberto da Fonseca Silva |
| Abstract: | This paper assesses the effects of income redistribution policies on "responsibilit -sensitive" fairness levels in major Latin American countries. In doing so, the following items are analyzed- i) the fairness rule described in Bossert (1995),Konow (1996), and Cappelen & Tungodden (2007) and; ii) the redistribution mechanism (taxation policy) proposed by Ooghe & Peich (2010). The results indicate that taxation does not have a significant effect on Latin American fairness indicators. This behavior can be explained, among other factors, by the fiscal design used, which utilizes high rates associated with the effort variables and fails to equalize unequal opportunities. |
| Keywords: | Theory of Justice,Redistribution, |
| JEL: | D31 E62 H2 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ppg:ppgewp:4&r=acc |
| By: | Stuart McDonald (School of Economics, The University of Queensland); Joanna Poyago-Theotoky |
| Abstract: | This paper performs a comparison of two well known approaches for modelling R&D spillovers associated with investment in E-R&D, namely dAspremont-Jacquemin and Kamien-Muller-Zang. We show that there is little qualitative difference between the models in terms of total surplus delivered when selecting the optimal tax regime when there is precommitment under cooperative regimes in which firms coordinate expenditures to maximize joint profits. However, under non-cooperative regimes there is marked difference, with the model of Kamien- Muller-Zang leading to higher taxation rates when firms share information. Furthermore, we argue that the Kamien-Muller-Zang model is of questionable validity when modelling R&D on emissions reducing technology due to counter intuitive results showing a positive relationhip between R&D spillovers and emissions taxes. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:455&r=acc |
| By: | Oscar Amerighi (Departiment of Economic Sciences, University of Bologna); Giuseppe De Feo (Department of Economics, University of Pavia) |
| Abstract: | In this paper we investigate tax/subsidy competition for FDI between countries of different size when a domestic firm is the incumbent in the largest market. We investigate how the nature (public or private) of the incumbent firm affects policy competition between the two governments seeking to attract FDI. We show that the country hosting the incumbent always benefits from FDI if the domestic firm is a public welfare-maximizing firm, while its welfare may decrease when it is a private firm, as already shown by Bjorvatn and Eckel (2006). We also show that, contrary to the case of a private domestic incumbent, a public firm acts as a disciplinary device for the foreign multinational that will always choose the efficient welfare-maximizer location. Finally, an efficiency-enhancing role of policy competition may only arise when the domestic incumbent is a private firm, while tax competition is always wasteful when the incumbent is a public firm. |
| Keywords: | Foreign Direct Investment; Tax/subsidy competition; Public firm; International mixed oligopoly |
| JEL: | F12 F23 H25 H73 L13 L33 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:pav:wpaper:161&r=acc |