nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒07‒14
nine papers chosen by
Alexander Harin
Modern University for the Humanities

  1. A common corporate tax base for Europe: An impact assessment of the draft council directive on a CC(C)TB By Spengel, Christoph; Ortmann-Babel, Martina; Zinn, Benedikt; Matenaer, Sebastian
  2. Explaining European Patterns of Taxation: From the Introduction of the Euro to the Euro-Crisis By Mark Hallerberg
  3. The impact of corporate taxes on investment: An explanatory empirical analysis for interested practitioners By Dreßler, Daniel
  4. Voluntary pension savings and tax incentives: Evidence from Finland By Jarkko Harju
  5. Ontario's Tax on the Rich: Grasping at Straw Men By Alexandre Laurin
  6. Reform Priorities for Sub-national Revenues in Brazil By Teresa Ter-Minassian
  7. Tax Bunching, Income Shifting and Self-employment By Daniel le Maire; Bertel Schjerningo
  8. Subnational Taxation in Large Emerging Countries: BRIC Plus One By Richard M. Bird
  9. The indirect effects of auditing taxpayers. By Ratto, Marisa; Thomas, Richard; Ulph, David

  1. By: Spengel, Christoph; Ortmann-Babel, Martina; Zinn, Benedikt; Matenaer, Sebastian
    Abstract: After intensive and extensive preparation, the European Commission released the long-awaited proposal for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB) on March 16, 2011. In the context of the Europe 2020 Strategy, major objectives of the proposed CCCTB are the elimination of transfer pricing concerns, the removal of double taxation due to conflicting tax claims between Member States and, ofcourse, the reduction of tax compliance costs. However, as the second and the third step of the proposed CCCTB, i.e. the consolidation and the allocation mechanism, still suffer from considerable shortcomings, we recommend introducing the CCCTB in two steps. In this context, our paper focuses on the first step of a CCCTB, i.e. the common corporate tax base (CCTB). The paper combines qualitative and quantitative analyses on the key differences and similarities between the proposed CCTB and current tax accounting practice in all 27 Member States, Switzerland and the U.S. It offers not only a broad geographical scope, but also great detail in analyzing the differences in tax accounting and quantifying the change in tax burden induced by the introduction of a CCTB in each Member State, Switzerland and the U.S. --
    Keywords: CCCTB,Corporate Taxation,Effective Tax Burden,European Tax Analyzer
    JEL: H20 H25
    Date: 2012
  2. By: Mark Hallerberg
    Abstract: This paper reviews developments in Europe from the eve of the introduction of the euro through the euro crisis. The paper begins with a discussion of the tax reform agenda. Although there are differences in the literature on specific taxes, and while European countries vary in their preferred levels of taxation, there is general consensus on the shape reforms should take. The paper then discusses the evolution of tax systems with the overall agenda in mind. It is found that overall revenue levels were broadly stable until just before the crisis, but marginal rates in corporate and top personal income declined almost continuously. During the crisis, however, this trend ended, with countries in the greatest fiscal difficulties raising tax rates and tax burdens. The last section provides a short analysis of why there were reforms in some countries but not others. Key variables include tax competition among member states, partisanship, underlying preferences in the population for redistribution, and the number of partisan veto players.
    JEL: H21 H22 H24
    Date: 2012–05
  3. By: Dreßler, Daniel
    Abstract: The scientific literature provides evidence for an impact of company taxes on investments. Practitioners, however, have a skeptical view on the meaning of this effect. This paper builds the bridge between research and the interested practice by providing detailed descriptives and clearly showing how the effects are derived. It analyzes the development of German multinationals' direct investments abroad and of foreign multinationals' investments in Germany from 1996 till 2008. A split along federal states is applied. Starting from the analysis of the basic tax effect, the paper also covers current research topics when analyzing the impact of existing loss carryforwards and when tracing holding structures. The descriptive statistics already show that cross-border investments have increased strongly. The development of Baden-Württemberg mainly corresponds to that of Germany. The impact of taxation on investments is negative. A ten percentage points higher corporate tax rate leads to about five percent lower investments, measured by fixed assets. This effect is smaller for those companies which show loss carryforwards. A lower tax rate at a specific location especially seems to attract holding companies, which are applied for tax efficient group structuring. --
    Keywords: Corporate Taxation,Foreign Direct Investment,Empirical Analysis,Multinational Firms
    JEL: F23 H25 H32
    Date: 2012
  4. By: Jarkko Harju
    Abstract: This paper studies empirically savers? behavioral responses to the Finnish tax reform of 2005 by using comprehensive panel data. The tax schedule of voluntary pension savings changed from progressive to proportional, changing the saving incentives in different subgroups. The results indicate that the reform altered saving behavior by reducing voluntary pension saving coverage among high income-earners by 4 percentage points and increasing it among low incomeearners by 2 percentage points. The reform also reduced annual saving contributions among high income-earners by over 20 percent. The estimated effects result entirely from the changed saving behavior of men.
    Keywords: Voluntary pension savings, tax reform, tax incentives
    JEL: H24 H31
    Date: 2012–06–25
  5. By: Alexandre Laurin (C.D. Howe Institute)
    Abstract: Ontario’s new “tax on the rich,” which was introduced in the 2012 Budget, affects 25,000 high-income earners and their families. These families matter a lot for the province’s fortunes: about one of every five income tax dollars in Ontario already comes out of their pockets. Ontario’s personal income tax system already redistributes more income than most other provinces. The province’s top 1 percent of earners shoulder more than one-quarter of all income taxes, while the bottom 75 percent shoulder about 12 percent. The new tax on high-income earners will likely create more economic costs than benefits: taxpayers’ behavioural responses will reduce revenue over the long run by more than the province can expect to collect from the tax hike.
    Keywords: Fiscal and Tax Competitiveness, Ontario (Canada), tax increase, personal tax rate
    JEL: H24
    Date: 2012–06
  6. By: Teresa Ter-Minassian
    Abstract: This paper surveys the system of sub-national own revenues and the inter- governmental transfer system (including the sharing of oil revenues) in Brazil, highlighting their critical flaws. The latter include heavy reliance on a mixed- origin/destination-based value-added tax and many sub-national governments’ inadequate exploitation of the tax bases assigned to them. The paper then discusses reform priorities, outlining a comprehensive reform strategy and some initial steps that could be taken toward its implementation in the near term, as well as related political economy considerations.
    JEL: H21 H22 H24
    Date: 2012–05
  7. By: Daniel le Maire (Department of Economics, University og Copenhagen); Bertel Schjerningo (Department of Economics, University og Copenhagen)
    Abstract: This paper proposes a dynamic extension to Saez (2010) bunching formula that allows us to distinguish bunching based on real responses and income shifting. We provide direct evidence of income shifting and pronounced bunching in taxable income for the case of Danish self-employed. If income shifting was neglected in this case, we would conclude that taxable incomes were highly sensitive to changes in marginal tax rates. We show, however, that more than half of the observed bunching in taxable income for the self-employed is driven by intertemporal income shifting, implying a structural elasticity in the range of 0.14-0.20
    Keywords: Self-employment, tax bunching, retained pro?ts, tax avoidance, income shifting
    JEL: H20 J20
    Date: 2012–05
  8. By: Richard M. Bird (Institute on Municipal Finance and Governance, University of Toronto)
    Abstract: This paper reviews the evolution and current state of subnational taxation in five large emerging countries: Brazil, Russia, India, China, and Nigeria—BRIC plus one. As these case studies show, intergovernmental fiscal relations in any country are inevitably both path-dependent and context-sensitive. In India and Brazil, for example, subnational governments already have a significant degree of fiscal autonomy in being able to set some key tax rates. In both countries, however, substantial attention still must be paid to improving the general consumption taxes that are the main source of regional government revenues as well as the property taxes on which local governments mainly depend. Although Nigeria, like India and Brazil, is a federation, its fiscal system depends so heavily on oil revenues that almost all political attention has been focused on securing a bigger share of these revenues. Both China and Russia have made important changes in the direction of centralizing rather than decentralizing effective control over subnational taxes. In both countries, the key issue is the extent to which fiscal decentralization is to be accompanied by significant political decentralization. At present, in neither China nor Russia is it clear that the central authorities are willing to permit subnational governments much autonomy in this respect.
    Keywords: state and local taxation, intergovernmental fiscal relations, Brazil, Russia, India, China, Nigeria
    JEL: H71 H77 P35 P43
    Date: 2012–03
  9. By: Ratto, Marisa; Thomas, Richard; Ulph, David
    Abstract: In this paper we focus on the effects of investigations on tax compliance. Results from empirical studies suggest that the effects of audits are not only in terms of recovered unpaid tax (direct effects), but there are also indirect effects in terms of future better compliance in the rest of the community. The evidence suggests that such indirect effects tend to outweigh the direct effect. However, current policy decisions of how to allocate investigation resources across different groups of taxpayers generally neglect the indirect effects, generating a potential resource misallocation issue. With the aim to clarify a possible mechanism through which the indirect effects work and hence to inform any policy recommendations, we model tax compliance as a social norm and decompose the total effect of an increase in the audit probability into a direct effect (increased expected fine) and a multiplier effect due to taxpayers’ interdependencies.
    Keywords: optimal audit rule; tax evasion; social norm; opportunities to evade;
    JEL: D81 H26 H30 K42
    Date: 2012

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