nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒05‒22
eleven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. De Facto Capital Mobility, Equality, and Tax Policy in Open Economies By Troeger, Vera
  2. An extensive look at taxes: how does endogenous retirement affect optimal taxation? By William B. Peterman
  3. Corruption and tax evasion an optimal policy By Jellal, Mohamed; Bouzahzah, Mohamed
  4. Evaluation of the Effects of Reduced Personal and Corporate Tax Rates on the Growth Rates of the U.S. Economy By Jacques K Ngoie; Arnold Zellner
  5. Value Added to Invested Capital (VAIC): New Financial Performance Metric and Valuation Tool By Rauf Ibragimov; Ignacio Velez Pareja; Jospeh Tham
  6. Place-based Tax Exemptions and Displacement Effects : An Evaluation of the Zones Franches Urbaines Program By Pauline Givord; Roland Rathelot; Patrick Sillard
  7. The Funding of State and Local Pensions: 2011 - 2015 By Alicia H. Munnell; Jean-Pierre Aubry; Josh Hurwitz; Madeline Medenica; Laura Quinby
  8. Ausrichtung der Unternehmensführung auf nachhaltige Wertschöpfung nach dem Deutschen Corporate Governance Kodex? By Lingnau, Volker; Kreklow, Katharina
  9. Monetary Policy and Fiscal Limits with No-Default By Gliksberg, Baruch
  10. Awareness To Accounting And Role Of Accounting At Religious Organisations. The Case Of Brotherhoods Of Seville At The Last Decade Of 16th Century By Jesus Damian Lopez Manjon; Juan Baños Sanchez-Matamoros; Maria Concepcion Alvarez-Dardet Espejo
  11. Measuring the underground economy with the currency demand approach: a reinterpretation of the methodology, with an application to Italy By Guerino Ardizzi; Carmelo Petraglia; Massimiliano Piacenza; Gilberto Turati

  1. By: Troeger, Vera (University of Warwick)
    Abstract: This paper attempts at giving theoretical and empirical answers to the remaining puzzles in the literature on tax competition: the persistently high tax rates on mobile capital and the large variation in domestic tax systems. I argue that governments face a political trilemma, in which they cannot maintain the politically optimal level of public good provision, reduce capital taxes to competitive levels and implement a political support-maximizing mix of tax rates on capital and labour simultaneously. In particular, while legal restriction on capital flows have been eliminated by virtually all OECD countries, de facto capital mobility falls short of being perfect. Limits to full capital mobility result from ownership structures: the higher the concentration of capital, the higher the de facto mobility of capital and the lower the equilibrium tax rate. Second, the demand for the provision of public goods further constraints governments’ choices of the capital tax rate. If revenue from taxation of mobile factors declines, politicians cannot necessarily cut back spending without losing political support. Policy makers, accordingly, do not face a simple optimization problem when deciding on capital taxation. Rather, they have to choose a tax system which allows them to supply an appropriate level of public goods. Policy makers finally face a trade-off resulting from the redistributive conflict between capital-owners and workers. This conflict does not resemble a mere zero-sum game, because lower levels of capital taxation are likely to improve aggregate welfare, but the decision on capital taxation also cannot be analyzed in isolation from the distributive effects of reducing taxes on mobile factors. This political logic of tax competition generates important predictions which are tested empirically for 23 OECD countries over 30 years within a spatial econometrics framework
    Date: 2012
  2. By: William B. Peterman
    Abstract: This paper considers the impact on optimal tax policy of including endogenously determined retirement in a life cycle model. Allowing individuals to determine when they retire causes the optimal tax on capital to increase by 75% because of two implicit changes in the aggregate labor supply elasticity. First, including endogenous retirement causes an increase in the overall aggregate labor supply elasticity since agents can change their labor supply on both the intensive and extensive margins. In response, the government limits the distortions from the tax policy by lowering the tax on labor and increases the tax on capital. Second, given that the choice to retire is more relevant for older individuals, endogenous retirement disproportionately increases older agent's elasticity compared to younger individuals. Ideally, the government would decrease the relative labor income tax on individuals when they are older and supply labor more elastically. However, in the absence of age-dependent taxes, the government mimics such a tax policy by further increasing the tax on capital. I find that the welfare lost from not accounting for endogenous retirement when solving for the optimal tax policy is equivalent to approximately one percent of lifetime consumption.
    Date: 2012
  3. By: Jellal, Mohamed; Bouzahzah, Mohamed
    Abstract: Under Principal-Agent-Supervisor paradigm, we examine in this paper how a tax collection agency changes optimal schemes in order to lessen the occurrence of corruption between the tax collector and the taxpayer. The Principal, who maximizes the expected net fiscal revenue, reacts by decreasing tax rates when the supervisor is likely to engage in corrupt transaction with taxpayer.The combat against collusion and corruption may explain the greater reliance on indirect taxes than on direct taxes both in developed and developing countries like Morocco.
    Keywords: Principal;Supervisor;Agent; Corruption; Tax Evasion
    JEL: D73 D82 H2 H26
    Date: 2012
  4. By: Jacques K Ngoie; Arnold Zellner
    Abstract: Using several variants of a Marshallian Macroeconomic Model (MMM), see Zellner and Israilevich (2005) and Ngoie and Zellner (2012), this paper investigates how various tax rate reductions may help stimulate the U.S. economy while not adversely affecting aggregate U.S. debt. Variants of our MMM that are shown to fit past data and to perform well in forecasting experiments are employed to evaluate the effects of alternative tax policies. Using quarterly data, our one-sector MMM has been able to predict the 2008 downturn and the 2009Q3 upturn of the U.S. economy. Among other results, this study, using transfer and impulse response functions associated with our MMM, finds that permanent 5 percentage points cut in the personal income and corporate profits tax rates will cause the U.S. real GDP growth rate to rise by 3.0 percentage points with a standard error of 0.6 percentage points. Also, while this policy change leads to positive growth of the government sector, its share of total real GDP is slightly reduced. This is understandable since short run effects of tax cuts include the transfer of tax revenue from the government to the private sector. The private sector is allowed to manage a larger portion of its revenue while government is forced to cut public spending on social programs with little growth enhancing effects. This broadens private economic activities overall. Further, these tax rate policy changes stimulate the growth of the federal tax base considerably which helps to reduce annual budget deficits and the federal debt.
    Keywords: Marshallian Macroeconomic Model, Disaggregation, Transfer Functions, Impulse Response Functions, U.S. Fiscal Policy Analysis.
    JEL: E27
    Date: 2012
  5. By: Rauf Ibragimov; Ignacio Velez Pareja; Jospeh Tham
    Abstract: The paper introduces a new financial metric for managerial performance evaluation, Value Added to Invested Capital (VAIC), with the cost of unlevered equity as a hurdle rate to calculate the capital charge rather than the widely accepted WACC. VAIC preserves all positive features of the conventional residual operating income and EVA and has the distinct advantage of computational simplicity and straightforward interpretation. Associated valuation model is equivalent to the standard discounted cash flow approach; this equivalence is formally proved under certain assumptions regarding the risk of tax shields and confirms consistency of the new metric proposed. VAIC can serve as an aggregate financial indicator on the business performance dashboards, and might as well be considered a valid substitute for the established EVA, ReOI and EP metrics in evaluating managerial performance. Equivalence of the VAIC valuation model to the fundamental approach of valuing a business by cash flow discounting makes this metric not only a robust measure of financial performance but also a full-fledged investment valuation tool.
    Date: 2012–05–11
  6. By: Pauline Givord (CREST); Roland Rathelot (CREST); Patrick Sillard (INSEE)
    Keywords: enterprise zones, local employment, place-based policies, propensity-score matching, externalities
    JEL: C23 J23 R38
    Date: 2011–06
  7. By: Alicia H. Munnell; Jean-Pierre Aubry; Josh Hurwitz; Madeline Medenica; Laura Quinby
    Abstract: The stock market hovers around pre-crisis peaks, tax revenues have rebounded, and plan sponsors have raised employee contributions for all workers and/ or reduced benefits for new workers, yet the funded status of state and local pension plans have once again slipped. This result reflects slow growth in the value of actuarial assets as actuaries in the public sector tend to smooth gains and losses over several years, which was only partly mitigated by an unexpected reduction in liability growth.
  8. By: Lingnau, Volker; Kreklow, Katharina
    Abstract: Management's obligation to focus on the sustainable creation of value by the 2009 German Corporate Governance Code. The modifications of the preamble and of section 4.1.1 on the tasks and responsibilities of management boards in the 2009 German Corporate- Governance-Code got astonishingly few attention and critical acclaim considering their potential consequences. A discußion of the amendments' economic impact as well as a survey of the acceptance in literature and an examination of corporation's reactions towards these amendments through a qualitative analysis of financial statements and reports on sustainability of DAX-30- companies indicates a clear discrepancy between the amendments' conceptual relevance on the one hand and the reactions to these amendments on the other hand. This paper discußes causes of this considerable discrepancy. -- Dieser Beitrag setzt sich mit zweien der umfangreichen änderungen auseinander, die der Deutsche Corporate Governance Kodex [DCGK] im Jahr 2009 erfahren hat. Er behandelt die änderungen der Präambel und des Abschnitts 4.1.1 über die Leitung des Unternehmens, die auch nach der weiteren überarbeitung des Kodex von Mai 2010 Bestand haben, jedoch in Anbetracht ihrer potentiellen Tragweite bisher erstaunlich wenig Aufmerksamkeit und kritische Würdigung erfahren haben. Zunächst werden die beiden ausgewählten änderungen kurz erläutert, um dann die grundsätzliche betriebswirtschaftliche Bedeutung dieser änderungen zu diskutieren. Daran anschließend wird zunächst ein überblick über die Rezeption der änderungen in der Literatur gegeben, gefolgt von einer Untersuchung der Resonanz auf die ausgewählten änderungen bei den Unternehmen anhand der Ergebniße einer qualitativen Analyse der Geschäfts- und Nachhaltigkeitsberichte 2009 der DAX-30-Unternehmen. Ergebnis dieser Betrachtungen ist ein klarer Widerspruch zwischen der konzeptionellen Bedeutung der änderungen einerseits und den Reaktionen auf diese änderungen andererseits, deßen mögliche Gründe abschließend erörtert werden.
    Date: 2011
  9. By: Gliksberg, Baruch (Department of Economics, University of Haifa)
    Abstract: This paper discusses monetary and fiscal interactions in fiscal stress with no outright default. Two distortions prevail in the economy: income taxes and liquidity constraints. Possible obstructions to fiscal policy include: a ceiling on the equilibrium Debt-to-GDP ratio; zero elasticity of tax revenues; a political intolerance of rising tax rates; A Laffer curve emerges endogenously. In equilibrium, fiscal solvency is brought about through adjustments to the level of nominal prices. Three regimes achieve this goal: FC - an interaction of a fiscal rule that targets both output and public debt with a neutral monetary policy; FD - an interaction of a fiscal rule that targets the primary deficit with an active monetary policy; FDA - an interaction of an austere fiscal rule with a passive monetary policy.
    Keywords: Distorting Taxes; Finance Constraint; Fiscal Limits; Fiscal Rules; Fiscal Theory of Prices;
    JEL: E42 E62 E63 H60
    Date: 2012–04–30
  10. By: Jesus Damian Lopez Manjon (Department of Finance and Accounting, Universidad Pablo de Olavide); Juan Baños Sanchez-Matamoros (Department of Finance and Accounting, Universidad Pablo de Olavide); Maria Concepcion Alvarez-Dardet Espejo (Department of Finance and Accounting, Universidad Pablo de Olavide)
    Abstract: This work questions if religious organizations with common shared beliefs and sacred objectives, but which members had a different level of awareness to accounting, should show a different behaviour concerning: a) the status of accounting in their internal organisations; and b) the permeability of such organizations to new accounting techniques. To reach our aim, we have analysed the content of 6 rules of brotherhoods located in the city of Seville (Spain), and enacted at the last decade of the 16th century. We have split the brotherhoods depending on its link or not with a guild or professional group.We can conclude that the awareness to accounting of its members and the perception of the belief system are explanations to cover the dissimilar behaviour of the brotherhoods in relation to accounting.
    Keywords: Accounting History; Religious Organizations; 16th century; Belief System
    Date: 2012–05
  11. By: Guerino Ardizzi (Banca d'Italia); Carmelo Petraglia (University of Basilicata); Massimiliano Piacenza (University of Torino); Gilberto Turati (University of Torino)
    Abstract: We contribute to the debate on how to assess the size of the underground or shadow economy with a reinterpretation of the traditional Currency Demand Approach (CDA) à la Tanzi. We introduce three main innovations. First, we take as dependent variable in the money demand equation a direct measure of the value of cash transactions: the flow of cash withdrawn from current accounts relative to total non-cash payments. This avoids use of the Fisher equation and so overcomes two severe criticisms of the traditional CDA. Second, instead of the tax burden, usually taken as the main motive for non-compliance, we include among the covariates two direct indicators of detected tax evasion. Finally, we also control for the role of illegal economic activity, such as drug dealing and prostitution, which – jointly with the shadow economy – contributes to the larger aggregate of the unobserved economy and represents a significant component of total cash payments. We then propose an application of this “modified CDA” to a panel of 91 Italian provinces for the years 2005-2008.
    Keywords: underground economy, currency demand approach, cash transactions, tax evasion, illegal production
    JEL: E26 E41 H26 K42 O17
    Date: 2012–04

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