nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒05‒29
nine papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Behavioral dynamics of tax compliance under an information services initiative By McKee, Michael; Siladke, Caleb; Vossler, Christian A.
  2. Right Idea, Wrong Direction: Obama’s Corporate Tax Reform Proposals By Gary Clyde Hufbauer; Martin Vieiro
  3. The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown By Niels Johannesen; Gabriel Zucman
  4. Some effects of tax information services reliability and availability on tax reporting behavior By Vossler, Christian A.; McKee, Michael; Jones, Michael
  5. Taxes and bribery: The role of monitoring, bargaining power and red tape By Jean-Paul Azam; Bernard Gauthier; Jonathan Goyette
  6. Evaluation of the Effects of Reduced Personal and Corporate Tax Rates on the Growth Rates of the U.S. Economy By Jacques Kibambe Ngoie; Arnold Zellner
  7. Problems in taxation: An optimization approach for loss offset options By Schanz, Sebastian; Schmidt, Günter; Dinh, Hai-Dung; Kersch, Mike
  8. Optimal tax threshold: the consequences on efficiency of official vs. effective enforcement By Jonathan Goyette
  9. Short-run Distributional Effects of VAT Rate Change: Evidence from a consumption tax rate increase in Japan By David CASHIN; UNAYAMA Takashi

  1. By: McKee, Michael; Siladke, Caleb; Vossler, Christian A.
    Abstract: Tax authorities utilize the audit process, imposing penalties on tax evaders, as their primary means of enforcement. In recent years, a “service” paradigm, whereby tax authorities provide information about correct tax reporting to taxpayers, has shown the potential to further “encourage” correct tax reporting. This research utilizes laboratory experiments to investigate the behavioral dynamics pertaining to information acquisition and tax evasion. The results show that the overall effect of a helpful information service is to decrease tax evasion. Further, an audit has the behavioral effect of lowering information acquisition rates and increasing evasion immediately after experiencing a penalty. This effect persists (although diminishes) in subsequent tax reporting decisions.
    Keywords: Tax evasion; Tax compliance; Behavioral Dynamics; Behavioral economics; Experimental economics
    JEL: C91 H26
    Date: 2011–12–23
  2. By: Gary Clyde Hufbauer (Peterson Institute for International Economics); Martin Vieiro (Peterson Institute for International Economics)
    Abstract: The need for US corporate tax reform is blindingly obvious. Conservatives contend that the top corporate tax rate—whether measured in statutory or effective terms—is the second highest in the Organization for Economic Cooperation and Development (OECD). Liberals argue that the US corporate tax system is riddled with complex "loopholes," enabling many firms—whether or not incorporated—to pay less than their fair share. Responding to these criticisms, Obama's White House and Treasury Department released a joint report entitled "The President's Framework for Business Tax Reform." Unfortunately, the report omits the detail needed to fully assess its proposals. But if the devil ever lives in the details, it is in the details of the tax code. Instead of details, the Framework report focuses on five elements of reform: the nominal and effective corporate tax rate, incentives for domestic manufacturing, taxation of international income, the tax code for small business, and the fiscal impact of proposed reforms. The report greatly exaggerates the revenue loss entailed by cutting the statutory corporate tax rate, and it proposes damaging new taxes on international business that would undermine US exports. Overall, the report unduly concentrates on manufacturing activity, while neglecting America's strength in services, the most prominent future driver of jobs, investment, and growth. Projected revenue gains are not large enough to help curb the rising debt-to-GDP ratio, but the report ducks any discussion of a national consumption tax.
    Date: 2012–05
  3. By: Niels Johannesen (Department of Economics - University of Copenhagen - University of Copenhagen); Gabriel Zucman (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: During the financial crisis, G20 countries compelled tax havens to sign bilateral treaties providing for exchange of bank information. Is it the end of bank secrecy? Exploiting a unique panel dataset, we study how the treaties affected bank deposits in tax havens. Our results suggest that most tax evaders did not respond to the treaties but that a minority responded by transferring their deposits to havens not covered by a treaty. Overall, the G20 tax haven crackdown caused a modest relocation of deposits between havens but no significant repatriation of funds: the era of bank secrecy is not yet over.
    Keywords: Tax havens ; Tax evasion
    Date: 2012–02
  4. By: Vossler, Christian A.; McKee, Michael; Jones, Michael
    Abstract: As an alternative to analyzing field data, our research utilizes controlled laboratory experiments with human decision makers and salient financial incentives. Within the laboratory, we determine (hence, know) the true tax liability, and then identify the effects of information services by systematically varying the setting across groups of players. In particular, our experimental design varies the degree of accessibility and accuracy of information services. Our design allows us to observe both the tax reporting behavior as well as the propensity of the taxpayer to obtain information by making information acquisition a (sometimes costly) choice.
    Keywords: tax evasion; laboratory experiments
    JEL: D8 C91 H26
    Date: 2011–06
  5. By: Jean-Paul Azam (Institut d’économie industrielle, Université de Toulouse 1); Bernard Gauthier (Institut d’économie appliquée, HEC Montréal); Jonathan Goyette (Department of Economics and GRÉDI, Université de Sherbrooke)
    Abstract: This paper investigates the negotiation over bribe and tax payments during the tax collection process in poor countries. We build a simple model where tax officials and firms bargain over bribes to let firms evade part of their taxes. Using a unique dataset on Ugandan firms we test the predictions of the model. We find significant and robust effects of effective tax payments, tax obligations, red tape costs and firm’s bargaining power on bribe payments. Taking into account the endogenous relationship between taxes paid and bribes, we find a significant and negative relationship between these two variables. A policy that would increase incentives to pay taxes per employee by 7% could at the same time decrease the level of bribes per employee by at least 1%.
    Keywords: Corruption, Tax evasion, Tax administration, Red Tape, Bargaining Power
    JEL: D73 H21 H26 H32 D82
    Date: 2012–04
  6. By: Jacques Kibambe Ngoie (Department of Economics, University of Pretoria); Arnold Zellner (Booth School of Business, University of Chicago)
    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: 2012–05
  7. By: Schanz, Sebastian; Schmidt, Günter; Dinh, Hai-Dung; Kersch, Mike
    Abstract: We solve an optimization problem which arises in the German tax system. Here losses in some period can be tranferred to other periods reducing tax in these periods. Two variants of taxation can be applied. We formulate the problem as a mixed binary mathematical program and solve it via branch and bound using binary search. Special cases of the problem can be solved by fast polynomial algorithms. --
    Date: 2012
  8. By: Jonathan Goyette (Department of Economics and GRÉDI, Université de Sherbrooke)
    Abstract: Significant efficiency gains are available when there is a gap between official and effective enforcement of a tax threshold. Using a unique dataset on Ugandan firms, I show that audits for business-related taxes are effectively based on the number of employees rather than the official tax threshold, which is in terms of sales. Based on the empirical evidence, I build a model of firms growth with entry and exit. Entrepreneurs evade part of their tax liabilities and, when audited, bargain with tax officials to keep some of the surplus from evasion in exchange of a bribe. The model is calibrated using the Ugandan data and replicates well some features of the data that are not explicitly targeted. Based on a counterfactual analysis, I show that the efficiency loss associated with evasion and corruption is of the order of 45% in Uganda. There is also a non-negligible gain in productivity per worker of 16% from enforcing the official tax threshold based on the level of sales rather than the effective threshold based on the number of employees. This gain in efficiency is essentially due to the reallocation of labor across productive units.
    Keywords: Tax Threshold, Evasion, Corruption, Firm’s Growth, Size Distribution of Firms, Simulation
    JEL: E27 H26 H83 L11 O11 O16 O43 O47
    Date: 2012–04
  9. By: David CASHIN; UNAYAMA Takashi
    Abstract: Households will purchase more items than usual prior to a value added tax (VAT) rate increase in order to avoid taxation. Since this type of arbitrage requires resources such as shopping time and storage space, the impacts of tax increases vary across households, which has brought distributional effects in the short-run. Using the case of a consumption tax rate increase in Japan in 1997, we show that households who are non-working, with non-working spouses and residing in larger houses, benefited from more arbitrage. To minimize short-run economic disturbances, step-by-step increases would be useful.
    Date: 2012–05

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