nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒04‒23
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Forensic accounting and the law: The forensic accountant in the capacity of an expert witness By Ojo, Marianne
  2. Taxing home ownership: distributional effects of including net imputed rent in taxable income By Figari, Francesco; Paulus, Alari; Sutherland, Holly; Tsakloglou, Panos; Verbist, Gerlinde; Zantomio, Francesca
  3. Empirical evidence on horizontal competition in tax enforcement By José María Durán-Cabré; Alejandro Esteller-Moré; Luca Salvadori
  4. China: Preferential Tax Policy By E. C. Hwa; Heng-fu Zou
  5. Identification of income-leisure preferences and evaluation of income tax policy By Charles Manski
  6. Do up-front tax incentives affect private pension saving in the United Kingdom? By Rowena Crawford; Richard Disney; Carl Emmerson
  7. A Theory of Optimal Capital Taxation By Thomas Piketty; Emmanuel Saez
  8. Transparency, Tax Pressure and Access to Finance By Ellul, Andrew; Jappelli, Tullio; Pagano, Marco; Panunzi, Fausto
  9. "Fiscal Devaluation" and Fiscal Consolidation: The VAT in Troubled Times By Ruud A. de Mooij; Michael Keen
  10. "Should the Japanese Tax System Be More Progressive? An Evaluation Using Simulated SMCFs Based on the Discrete Choice Model of Labor Supply" By Shun-ichiro Bessho; Masayoshi Hayashi

  1. By: Ojo, Marianne
    Abstract: This paper focuses on what constitutes “an attitude that includes a questioning mind and a critical assessment of audit evidence”, namely professional scepticism. This paper also focuses on factors and reasons contributory to the ever increasing use of (and the need for) forensic accountants – particularly in courts. It also addresses various standards which must be taken into consideration before testimonies provided by expert witnesses are considered to be admissible.
    Keywords: litigation support; investigative accounting; computer forensics; expert witnesses; fraud auditing
    JEL: K2 D8 M4
    Date: 2012–04–18
  2. By: Figari, Francesco; Paulus, Alari; Sutherland, Holly; Tsakloglou, Panos; Verbist, Gerlinde; Zantomio, Francesca
    Abstract: Imputed rental income of homeowners is tax exempt in most countries, despite the long-standing arguments recommending its inclusion in the tax base, on both equity and efficiency grounds. The current fiscal crisis revived interest towards this form of taxation. The paper investigates the fiscal and distributional consequences of including homeowners imputed rent, net of mortgage interest and maintenance costs, in taxable income as any cash income source that extends consumption opportunities. Three scenarios are analysed in six European countries: in the first imputed rent is included in the taxable income of homeowners, while at the same time existing mortgage interest tax relief schemes and taxation of cadastral incomes are abolished. In two further revenue-neutral scenarios, the additional tax revenue raised through the taxation of imputed rent is redistributed to taxpayers, either through a proportional rebate or a lump-sum tax credit. Results show how including net imputed rent in the tax base might affect inequality in each of the countries considered. Housing taxation appears to be a promising avenue for raising additional revenues, or lightening taxation of labour, with no inequality-increasing side-effects.
    Date: 2012–04–01
  3. By: José María Durán-Cabré (Universitat de Barcelona & IEB); Alejandro Esteller-Moré (Universitat de Barcelona & IEB); Luca Salvadori (Universitat de Barcelona & IEB)
    Abstract: Tax auditing parameters have been largely overlooked by the literature as policy-making instruments of any relevance; however, enforcement strategies are critical elements of the tax burden. In this paper we show that, in a federal framework, tax auditing policies can serve as additional tools for regional interaction. We examine the presence of this interaction by adopting a spatial econometric approach. We employ a time-space recursive model that accounts for sluggish adjustment in auditing policies and obtain results that are congruent with standard theory, corroborating the presence of horizontal competition between regions in their tax auditing policies. We also find that once regional governments acquire legal power, the opaque competition in enforcement policies disappears apparently switching to a more transparent competition in statutory tax parameters.
    Keywords: Tax administration and auditing, fiscal competition, fiscal federalism
    JEL: H71 H77 H83
    Date: 2012
  4. By: E. C. Hwa; Heng-fu Zou
    Date: 2012
  5. By: Charles Manski (Institute for Fiscal Studies and Northwestern University)
    Abstract: <p>The merits of alternative income tax policies depend on the population distribution of preferences for income and leisure. 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 imposed strong preference assumptions that lack foundation. This paper examines anew the problem of inference on income-leisure preferences and considers the implications for evaluation of tax policy. I first perform a basic revealed-preference analysis assuming only that persons prefer more income and leisure. This shows that observation of a person's time allocation under a status quo tax policy may bound his allocation under a proposed policy or may have no implications, depending on the tax schedules and the person's status quo time allocation. I next explore the identifying power of two classes of assumptions that restrict the distribution of income-leisure preferences. One assumes that groups of persons who face different choice sets have the same preference distribution. The second restricts the shape of this distribution. The generic finding is partial identification of preferences. This implies partial prediction of tax revenue under proposed policies and partial knowledge of the welfare function for utilitarian policy evaluation. </p>
    Date: 2012–03
  6. By: Rowena Crawford (Institute for Fiscal Studies); Richard Disney (Institute for Fiscal Studies and University of Nottingham); Carl Emmerson (Institute for Fiscal Studies)
    Abstract: The paper examines how individuals respond to complex decision-making environments – in particular, whether up-front financial incentives are an effective policy lever to change behaviour. The paper argues that incentives differ in their transparency and in their complexity; individuals are more likely to respond to incentives that are both transparent and imply a large pay-off in terms of net income. The paper focuses on household ‘tax planning’ in the context of tax reliefs for retirement saving in the United Kingdom. It examines whether take-up of retirement saving instruments increases at the higher rate threshold for income tax, since tax relief is given at the marginal tax rate and should be more attractive to those just above this threshold than to those just below it. It then examines a more complex case where the tax system provides an incentive for pension saving to do be done by one member of a couple. Econometric results are obtained from the Family Resources Survey on these two tests of household responses to complex incentives.
    Date: 2012–03
  7. By: Thomas Piketty; Emmanuel Saez
    Abstract: This paper develops a realistic, tractable theoretical model that can be used to investigate socially-optimal capital taxation. We present a dynamic model of savings and bequests with heterogeneous random tastes for bequests to children and for wealth per se. We derive formulas for optimal tax rates on capitalized inheritance expressed in terms of estimable parameters and social preferences. Under our model assumptions, the long-run optimal tax rate increases with the aggregate steady-state flow of inheritances to output, decreases with the elasticity of bequests to the net-of-tax rate, and decreases with the strength of preferences for leaving bequests. For realistic parameters of our model, the optimal tax rate on capitalized inheritance would be as high as 50%-60%–or even higher for top wealth holders–if the social objective is meritocratic (i.e., the social planner puts higher welfare weights on those receiving little inheritance) and if capital is highly concentrated (as it is in the real world). In contrast to the Atkinson-Stiglitz result, the optimal tax on bequest remains positive in our model even with optimal labor taxation because inequality is two-dimensional: with inheritances, labor income is no longer the unique determinant of lifetime resources. In contrast to Chamley-Judd, the optimal tax on capital is positive in our model because we have finite long run elasticities of inheritance to tax rates. Finally, we discuss how adding capital market imperfections and uninsurable shocks to rates of return to our optimal tax model leads to shifting one-off inheritance taxation toward lifetime capital taxation, and can account for the actual structure and mix of inheritance and capital taxation.
    JEL: H21
    Date: 2012–04
  8. By: Ellul, Andrew; Jappelli, Tullio; Pagano, Marco; Panunzi, Fausto
    Abstract: In choosing transparency, firms must trade off the benefits from better access to finance against the cost of a greater tax burden. We study this trade-off in a model with distortionary taxes and endogenous rationing of external finance. The evidence from two different data sets, one formed only by listed firms and another mainly by unlisted firms, bears out the model’s predictions: First, investment and access to finance are positively correlated with accounting transparency, especially in firms that depend more on external finance, and are negatively correlated with tax pressure. Second, transparency is negatively correlated with tax pressure, particularly in sectors where firms are less dependent on external finance, and is positively correlated with tax enforcement. Finally, financial development enhances the positive effect of transparency on investment, and encourages transparency by financially dependent firms.
    Keywords: access to finance; tax pressure; Transparency
    JEL: G31 G32 G38 H25 H26
    Date: 2012–04
  9. By: Ruud A. de Mooij; Michael Keen
    Abstract: This paper focuses on two core tax design issues that arise in addressing current fiscal challenges. It first explores the idea, prominent in troubled Eurozone countries, of a "fiscal devaluation": shifting from social contributions to the VAT as a way to mimic a nominal devaluation. Empirical evidence is presented which suggests that in Eurozone countries this may indeed improve the trade balance in the short-run, though, as theory predicts, the effects eventually disappear. The paper then assesses the wider scope for VAT reform in meeting fiscal consolidation needs, developing and beginning to apply a methodology for finding additional VAT revenue in ways less distortionary and fairer than further raising the standard rate.
    Keywords: Europe , Fiscal consolidation , Taxation , Value added tax ,
    Date: 2012–03–22
  10. By: Shun-ichiro Bessho (Faculty of Economics, Keio University); Masayoshi Hayashi (Faculty of Economics, University of Tokyo)
    Abstract: This paper evaluates the 1999 national income tax reform in Japan by comparing the social marginal costs of public funds (SMCFs) for changing the marginal tax rates in different income brackets before the reform occurred. To do so, we estimate the discrete choice model of labor supply using a data set of Japanese households in 1997 derived from the Employment Status Survey. We obtain an analog of the SMCF that allows for labor supply responses along both the intensive and the extensive margins on an individual basis. We generate such SMCFs using a micro-simulation method that utilizes the discrete choice model estimates for household preferences. Based on the simulated SMCFs evaluated using various distributional weights, we find that the value of the SMCF for a 1% increase in the marginal tax rate in any given income bracket decreases as the bracket moves from the bottom to the top. This finding suggests that the national government should have made the Japanese income tax system more progressive rather than less progressive as carried out in the 1999 reform. </table>
    Date: 2012–04

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