nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒06‒13
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Intertemporal Income Shifting in Expectation of Lower Corporate Tax Rates: The Tax Reforms in Central and Eastern Europe By Boryana Madzharova
  2. Imperfect Detection of Tax Evasion in a Corrupt Tax Administration By Escobari, Diego
  3. Does fiscal coopération increase local tax rates in urban areas? By Sylvie Charlot; Sonia Paty; Virginie Piguet
  4. Property Tax in Ireland: Key Choices By Keane, Claire; Walsh, John R.; Callan, Tim; Savage, Michael
  5. Why firms listed on an unregulated financial market comply voluntarily with IFRS: An empirical analysis with French data By Corinne Bessieux-Ollier; Elisabeth Walliser
  6. Transparency, Tax Pressure and Access to Finance By Andrew Ellul; Tullio Jappelli; Marco Pagano; Fausto Panunzi

  1. By: Boryana Madzharova
    Abstract: This paper examines if firms shift income out of years with high corporate tax rates into years when tax cuts are anticipated. Such intertemporal shifting can be one explanation for the stability of corporate tax revenues in Central and Eastern Europe, despite the major decline in the corporate tax rates and overall narrowing of the tax base starting in the late 90s. Using firm-level panel data for Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia from 1999 to 2005, the estimates indicate that the lower corporate tax rates induced a considerable increase in taxable income. Most of this increase, however, was due to short-term shifting of income to years with lower tax rates leading to non-transitory responses ranging from zero to .151, depending on the specification employed. Splitting the sample by firm size shows that income shifting is an appealing tax saving strategy for small and to a lesser extent medium-sized enterprises, but not for big firms. A further disaggregation by country reveals that the driving country behind the results is Romania.
    Keywords: corporate tax; income shifting; tax reforms; Central and Eastern Europe;
    JEL: H25 H32
    Date: 2012–05
  2. By: Escobari, Diego
    Abstract: This article models the imperfect detection of tax evasion motivated by the existence of a corrupt tax administration. Consistent with previous literature, fines and audit probabilities both have a positive effect on compliance. Moreover, the model shows that they have a negative effect on the bribes paid to corrupt tax officials. More corruption decreases compliance levels, giving honest auditors incentives to work harder to detect evasion. Giving inspectors a share of the detected evasion (tax farming) makes auditors work harder; however, increasing their wages reduces their exerted effort to discover evasion. Higher compliance can as well be achieved by hiring more efficient inspectors.
    Keywords: Taxation; Evasion; Corruption
    JEL: D73 J31 H83 H26
    Date: 2011–07–27
  3. By: Sylvie Charlot (INRA-GAEL (UMR 1215), 1221 rue des résidences 38400 Saint Martin d'Hères (France)); Sonia Paty (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Virginie Piguet (INRA UMR1041 CESAER, 26 boulevard Dr Petitjean, BP 87999, 21079 Dijon Cedex, France)
    Abstract: The main purpose of this paper is to assess the effects of fiscal cooperation on local taxation in a decentralized country, using the French experience in urban municipalities. We estimate a model of tax setting for local business tax using spatial and dynamic econometric techniques, for the period 1993-2003 and an unbalanced data set. As predicted by the theory, we find that reducing the number of municipalities is likely to limit tax competition and, as a consequence, increase local business tax rates.
    Keywords: fiscal cooperation, tax competition, vertical externalities, local business tax
    JEL: H2 H3 H7
    Date: 2012
  4. By: Keane, Claire; Walsh, John R.; Callan, Tim; Savage, Michael
    Abstract: The introduction of a property tax is now firmly on the policy agenda. Designing such a tax involves a series of choices which affect how the burden of the tax is distributed across households. In this paper we use SWITCH, the ESRI tax-benefit model, to explore the implications of alternative approaches designed to link a property tax with ability to pay. We also draw on international experience with property taxes to provide insights into choices regarding the structure and operation of a new tax. A key finding is that an income exemption limit below which property tax is not payable (with marginal relief for those with incomes just above the limit) could provide a powerful tool for shaping the income distribution consequences of the tax. Without such an approach, the highest burden would be on those with lowest incomes. However, an income exemption limit for a single person of ?12,000 per year, just above the State Contributory Pension rate, would greatly reduce the impact on low income groups. A higher income exemption limit of ?15,000, with a tax rate of ?2.50 per ?1,000 of house value would mean that the property tax would have little impact on those on the lowest incomes, and have its greatest impact ? a reduction in disposable income of just under 1 per cent ? on those with the highest incomes.
    Keywords: Ireland/property tax/taxes/Policy/income distribution
    Date: 2012–04
  5. By: Corinne Bessieux-Ollier (MRM - Montpellier Recherche en Management - Université Montpellier II - Sciences et Techniques du Languedoc : EA4557 - Université Montpellier I - Université Paul Valéry - Montpellier III - Groupe sup de Co Montpellier); Elisabeth Walliser (MRM - Montpellier Recherche en Management - Université Montpellier II - Sciences et Techniques du Languedoc : EA4557 - Université Montpellier I - Université Paul Valéry - Montpellier III - Groupe sup de Co Montpellier)
    Abstract: This study examines the determinants of voluntary adoption of IFRS by French companies listed on an unregulated financial market. These firms can choose IFRS or the French accounting standards to present their accounts. We analyze the annual reports of 85 French firms listed in 2010 on an unregulated financial market: Alternext. The results reveal that size is an important determinant of the voluntary adoption of IFRS, showing a positive correlation. The percentage of assets in place is also a significant factor: firms with a higher percentage are protected by heavy barriers to entry and they thus voluntarily adopt IFRS. Industry sector shows a negative and significant relationship, as it explains the decision not to adopt IFRS. The following variables are not significant: leverage, internationality, profitability, type of auditor, and ownership concentration. Our findings suggest that without the intervention of regulatory bodies, companies listed on an unregulated financial market will continue to opt for local accounting standards, thereby maintaining the status quo.
    Keywords: Voluntary adoption; determinants; accounting choices; IFRS; France; unregulated financial market
    Date: 2012
  6. By: Andrew Ellul; Tullio Jappelli; Marco Pagano; Fausto Panunzi
    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.
    Date: 2012–06

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