nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒05‒02
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The use of tax havens in exemption regimes By Gumpert, Anna; Hines Jr, James R; Schnitzer, Monika
  2. Capital Structure, Corporate Taxation and Firm Age By Michael Pfaffermayr; Matthias Stöckl; Hannes Winner
  3. Tax Reform in Norway: A Focus on Capital Taxation By Oliver Denk
  4. Optimal Redistributive Taxation with both Labor Supply and Labor Demand Responses By Laurence Jacquet; Etienne lehmann; Bruno Van Der Linden
  5. A Theory of Optimal Capital Taxation By Piketty, Thomas; Saez, Emmanuel
  6. Regional Effects of Federal Tax Shocks By Bernd Hayo; Matthias Uhl
  7. Evaluating the impact of fair value accounting on financial institutions: implications for accounting standards setting and bank supervision By Sanders Shaffer
  8. Problems with the Measurement of Banking Services in a National Accounting Framework. By Erwin Diewert; Dennis Fixler; Kimberly Zieschang

  1. By: Gumpert, Anna; Hines Jr, James R; Schnitzer, Monika
    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.
    Keywords: Manufacturing FDI; Multinational Firms; Profit Shifting; Service FDI; Tax Avoidance; Tax Havens
    JEL: F23 H87
    Date: 2012–04
  2. By: Michael Pfaffermayr (WIFO); Matthias Stöckl; Hannes Winner (WIFO)
    Abstract: This paper analyses the relationship between corporate taxation, firm age and debt. We adapt a standard model of capital structure choice under corporate taxation, focusing on the financing and investment decisions a firm is typically faced with. Our model suggests that the debt ratio is positively associated with the corporate tax rate, and negatively with firm age. Further, we predict that the tax-induced advantage of debt is more important for older than for younger firms. To test these hypotheses empirically, we use a cross-section of 405,000 firms from 35 European countries and 126 NACE 3-digit industries. In line with previous research, we find that a firm's debt ratio increases with the corporate tax rate. Further, we observe that older firms exhibit smaller debt ratios than their younger counterparts. Finally, consistent with our theoretical model, we find a positive interaction between corporate taxation and firm age, indicating that the impact of corporate taxation on debt is increasing over a firm's life-time.
    Keywords: Corporate taxation, Capital structure, Firm age
    Date: 2012–04–20
  3. By: Oliver Denk
    Abstract: Norway’s dual income tax system achieves high levels of revenue collection and income redistribution, without overly undermining economic performance and while paying attention to environmental externalities. It treats capital and labour income in different ways: capital income is taxed at a single low rate, while labour income is taxed at progressive rates. However, effective tax rates on savings vary widely across asset classes. The favourable treatment of owner-occupied housing relative to financial savings should be reduced, preferably by taxing imputed rents at the standard 28% statutory rate. The wealth tax implies very high effective tax rates on savings, indicating that it either gives rise to tax avoidance or significantly inhibits growth. The government should investigate the issue and, if the growth-equity trade-off is too unfavourable to growth, phase out or lower the wealth tax. To restrain tax avoidance by the wealthy, the base of the gift and inheritance tax should be broadened. Overall, the reform package recommended in this paper would improve the allocation of capital and increase work and investment incentives. It could be designed to be broadly neutral in regard to income redistribution and public revenue.<P>La réforme fiscale en Norvège : Privilégier l'imposition du capital<BR>En Norvège, le système d'imposition duale atteint d’excellents résultats en termes de recouvrement des recettes et de redistribution du revenu, sans pénaliser excessivement la performance économique et en prenant en compte les externalités environnementales. Ce système n’applique pas le même traitement aux revenus du capital et du travail : le revenu du capital est soumis à un taux d’imposition unique faible, tandis que celui du travail est taxé à des taux progressifs. Toutefois, les taux d’imposition effectifs de l’épargne varient beaucoup d’une catégorie d’actifs à l’autre. Le traitement favorable des logements occupés par leurs propriétaires devrait être réduit, de préférence en taxant leur valeur locative imputée au taux légal normal de 28 %. L’impôt sur la fortune entraîne des taux d’imposition effectifs de l’épargne très élevés, qui ouvrent la voie à l’évasion fiscale ou qui entravent significativement la croissance. Le gouvernement doit se pencher sur cette question et, si l’arbitrage entre croissance et équité est par trop défavorable à la croissance, éliminer progressivement l’impôt sur la fortune ou réduire son taux. Afin de restreindre les possibilités d’évasion fiscale de la part des contribuables les plus aisés, il faudrait élargir la base de l’impôt sur les donations et les successions. Dans l’ensemble, les réformes recommandées dans ce document amélioreraient la répartition du capital et renforceraient les incitations à travailler et à investir. Elles pourraient être conçues de façon à avoir un impact globalement neutre sur la redistribution des revenus et les recettes publiques.
    Keywords: Norway, taxation, capital taxation, own-occupied housing, dual income tax system, wealth tax, rate of return allowance, allowance for corporate equity, fiscalité, Norvège, double système d'imposition, imposition du capital, propriétaires occupants, impôt sur la fortune, taux de l'indemnité de retour, déduction pour capital de l'entreprise
    JEL: D9 H2 R21 R38
    Date: 2012–04–03
  4. By: Laurence Jacquet; Etienne lehmann; Bruno Van Der Linden (THEMA, Universite de Cergy-Pontoise; CREST; IRES - Université Catholique de Louvain and FNRS)
    Abstract: This paper characterizes the optimal redistributive tax schedule in a matching unemployment framework where (voluntary) nonparticipation and (involuntary) un- employment are endogenous. The optimal employment tax rate is given by an inverse employment elasticity rule. This rule depends on the global response of the employ- ment rate, which depends not only on the participation (labor supply) responses, but also on the vacancy posting (labor demand) responses and on the product of these two responses. For plausible values of the parameters, our matching environment induces much lower employment tax rates than the usual competitive model with endogenous participation only.
    Keywords: Optimal taxation, Labor market frictions, Unemployment, Kalai so- lution.
    JEL: D82 H21 J64
    Date: 2012
  5. By: Piketty, Thomas; Saez, Emmanuel
    Abstract: This paper develops a realistic, tractable normative theory of 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. 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, the optimal tax rate on capitalized inheritance should be as high as 50%-60% - or even higher for top wealth holders - if the government has meritocratic preferences (i.e., 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, bequest taxation remains desirable 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, positive capital taxation is desirable because our preferences allow for finite long run elasticities of inheritance to tax rates. Finally, we discuss how capital market imperfections and uninsurable shocks to rates of return can justify shifting one-off inheritance taxation toward lifetime capital taxation, and can account for the actual structure and mix of inheritance and capital taxation.
    Keywords: optimal taxation
    JEL: H10
    Date: 2012–04
  6. By: Bernd Hayo (University of Marburg); Matthias Uhl (University of Marburg)
    Abstract: This paper studies regional output asymmetries following U.S. federal tax shocks. We estimate a vector autoregressive model for each U.S. state, utilizing the exogenous tax shock series recently proposed by Romer and Romer (2010) and find considerable variations: estimated output multipliers lie between –0.2 in Utah and –3.3 in Hawaii. Statistically, the difference between state and national output effect is significant in about half the U.S. states. Analyzing the determinants of differences in the magnitude of regional tax multipliers suggests that industry composition of output and sociodemographic characteristics help explain the observed asymmetry across U.S. states in the transmission of federal tax policy.
    Keywords: Fiscal Policy Tax Policy Narrative Approach U.S. States Regional Effects Asymmetries in Fiscal Policy Transmission
    JEL: E32 E62 H20 R10 R11
    Date: 2012
  7. By: Sanders Shaffer
    Abstract: Recent standard-setting activity related to fair value accounting has injected new life into questions of whether fair value provides information useful for decision-making, and whether there might be unintended consequences on financial stability. This discussion paper provides insight into these questions by performing a holistic evaluation of fair value accounting’s usefulness, the potential impacts it may have on financial institutions and any broader macroeconomic effects. Materials reviewed as part of this analysis include public bank regulatory filings, financial statements, and fair value research. The bank supervisory rating approach referred to as CAMELS is used as an organizing principle for the paper. CAMELS serves as a convenient way to both categorize potential impacts of fair value on financial institutions, as well as provide a bank supervisory perspective alongside the more traditional investor’s views on decision usefulness. ; The overall conclusion based on the evidence presented is that implementing fair value accounting more broadly may not necessarily provide financial statement users with more transparent and useful reporting. Additionally, financial stability may be negatively impacted by fair value accounting due to the interconnectedness of financial institutions, markets and the broader economy. The analysis suggests that the current direction in which accounting standard setters and bank regulators are moving may represent a possible solution to address these concerns. U.S. accounting standard setters have recently proposed that fair value, along with enhanced disclosures, be applied in a more targeted manner. Bank regulators are developing new supervisory tools and approaches which may alleviate some of the potential negative impact of fair value on financial stability. Additional policy implications and areas for future study are suggested.
    Keywords: Financial stability ; Accounting ; Bank supervision ; Fair value
    Date: 2012
  8. By: Erwin Diewert (University of British Columbia and School of Economics, The University of New South Wales); Dennis Fixler (Bureau of Economic Analysis); Kimberly Zieschang (International Monetary Fund.)
    Abstract: The paper considers some of the problems associated with the indirectly measured components of financial service outputs in the System of National Accounts (SNA), termed FISIM (Financial Intermediation Services Indirectly Measured). The paper utilizes a user cost and supplier benefit approach to the determination of the value of various financial services in the banking sector. The present paper also attempts to integrate the balance sheet accounts in the SNA with the usual flow accounts. An empirical example of various nominal output concepts that could be applied to the U.S. commercial banking sector is presented.
    Keywords: User costs, banking services, deposit services, loan services, production accounts, System of National Accounts, FISIM, Financial Intermediation Services Indirectly Measured.
    JEL: C43 C67 C82 D24 D57 E22 E41
    Date: 2012–04

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