nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒07‒29
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Debt-Equity Bias: consequences and solutions By Serena Fatica; Thomas Hemmelgarn; Gaetan Nicodeme
  2. The use of tax havens in exemption regimes By Gumpert, Anna; Hines Jr., James R.; Schnitzer, Monika
  3. Dynamic Tax Competition under Asymmetric Productivity of Public Capital By Hiroki Tanaka; Masahiro Hidaka
  4. Business Taxation and Wages: Evidence from Individual Panel Data By Bauer, Thomas K.; Kasten, Tanja; Siemers, Lars
  5. Evolution of security transaction tax in India By Sinha, Pankaj; Mathur, Kritika
  6. The Effect of the UK Stamp Duty Land Tax on Household Mobility By Christian A. L. Hilber; Teemu Lyytikäinen
  7. Fiscal Union in Europe? Redistributive and Stabilising Effects of an EU Tax-Benefit System By Bargain, Olivier; Dolls, Mathias; Fuest, Clemens; Neumann, Dirk; Peichl, Andreas; Pestel, Nico; Siegloch, Sebastian
  8. Trade in Value Added and the Valued Added in Trade By Robert Stehrer

  1. By: Serena Fatica (European Commission); Thomas Hemmelgarn (European Commission); Gaetan Nicodeme (European Commission)
    Abstract: The tax deductibility of interest payments in most corporate income tax systems coupled with no such measure for equity financing creates economic distortions and exacerbates leverage. This paper discusses the consequences of this debt bias and the possible remedies.
    Keywords: Taxation, Financial sector, Debt, Allowance for Corporate Equity, Comprehensive Business Income Tax, corporate structure.
    JEL: H25 H32 G21 G32
    Date: 2012–08
  2. 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: Tax Havens; Multinational Firms; Tax Avoidance; Profit Shifting; Manufacturing FDI; Service FDI
    JEL: H87 F23
    Date: 2012–04
  3. By: Hiroki Tanaka; Masahiro Hidaka
    Abstract: We here expand the static tax competition models in symmetric small regions, which were indicated by Zodrow and Mieszkowski (1986) and Wilson (1986), to a dynamic tax competition model in large regions, taking consideration of the regional asymmetry of productivity of public capital and the existence of capital accumulation. The aim of this paper is to verify how the taxation policy affects asymmetric equilibrium based on a simulation analysis using an overlapping generations model in two regions. It is assumed that the public capital as a public input is formed on the basis of the capital tax of local governments and the lump-sum tax of the central government. As demonstrated in related literature, the optimal capital tax rate should become zero when the lump-sum tax is imposed only on older generations, however, the optimal tax rate may become positive when it is imposed proportionally on younger and older generations. In the asymmetric equilibrium, several cooperative solutions can possibly exist which can achieve a higher welfare standard than the actualized cooperative solution either in Region1 or 2. JEL classification Ôºö H21; H42; H71; H77; R13; R53 Keywords Ôºö Tax competition, Capital taxation, Capital accumulation, Public inputs, Infrastructure
    Date: 2011–09
  4. By: Bauer, Thomas K. (RWI); Kasten, Tanja (RWI); Siemers, Lars (University of Siegen)
    Abstract: Empirical evidence on the degree of business-tax shifting to employees via the wage level is highly controversial and rare. It remains open to which extent the tax burden is shifted, whether there are differences for tax increases and decreases, or whether there exists some treatment heterogeneity, that drive the respective results. Using a large administrative panel data set, we exploit the regional variation of the German business income taxation to address these issues. Our results suggest an elasticity of wages with respect to business taxes that ranges between -0.28 to -0.46, once we control for invariant unobserved regional and individual characteristics. Workers with low bargaining power, e.g., low-skilled, are affected most from business tax shifting, indicating that business-tax incidence involves distributional effects. Finally, we find evidence for an asymmetric tax incidence.
    Keywords: tax incidence, profit taxation, wages, asymmetric effects
    JEL: H22 H25 J31 J38
    Date: 2012–07
  5. By: Sinha, Pankaj; Mathur, Kritika
    Abstract: Securities Transaction Taxes have received much attention over the last few years with countries and global organizations trying to control the level of speculations, especially since the Global Financial Crisis. This study examines the impact of an increase in the level of securities transaction tax on traded quantity of shares and time series behaviour of stock returns using data from two prominent national stock exchanges of India. We find that when the tax on equity transactions increases from 0.1% to 0.125%, the quantity of traded shares (volume) decreases by more than twenty five percent. Since the volatility of returns on stocks is not constant through time, conditional heteroscedasticity models are used to estimate the volatility of stock returns. The impact of tax on volatility of return on indices is insignificant.
    Keywords: securities transaction taxes; stock market; returns; traded shares
    JEL: G14 G12 G18 G10
    Date: 2012–06–30
  6. By: Christian A. L. Hilber; Teemu Lyytikäinen
    Abstract: We estimate the effect of the UK Stamp Duty Land Tax on household mobility using micro data. Exploiting a discontinuity in the tax schedule as a quasi-experimental setting, we isolate the impact of the stamp duty from other determinants of mobility. Our empirical strategy essentially compares similar households with self-assessed house values on either sides of a cut-off value where the tax rate increases from 1 to 3 percent. We find that a higher stamp duty strongly negatively affects a household's propensity to move: the 2 percentage-point increase in the stamp duty may reduce mobility of homeowners by around 40 percent. This adverse effect is mainly confined to short-distance and non-job related moves.
    Keywords: Stamp duty, real estate transfer tax, transaction costs, household mobility
    JEL: D23 H21 H27 J61 R21 R31 R38
    Date: 2012–07
  7. By: Bargain, Olivier; Dolls, Mathias; Fuest, Clemens; Neumann, Dirk; Peichl, Andreas; Pestel, Nico; Siegloch, Sebastian
    Abstract: The current debt crisis has given rise to a debate about deeper fiscal integration in Europe. The view is widespread that moving towards a fiscal union would have a stabilising effect in the event of macroeconomic shocks. In this paper we study the economic effects of introducing two elements of a fiscal union: Firstly, an EU-wide tax and transfer system and secondly, an EU-wide system of fiscal equalisation. Using the European tax-benefit calculator EUROMOD, we exploit representative household microdata from 11 Eurozone countries to simulate these policy reforms and to study their effects on the distribution of income as well as their impact on automatic fiscal stabilisers. We find that replacing one third of the national tax and transfer systems by a European system would lead to significant redistributive effects both within and across countries. These effects depend on income levels and the structures of the existing national tax and transfer systems.The EU system would improve fiscal stabilisation especially in credit constrained countries. It would absorb between 10 and 15 per cent of a macroeconomic income shock. Introducing a fiscal equalisation system based on taxing capacity would redistribute revenues from high to low income countries. The stabilisation properties of this system, however, are ambiguous. This suggests that not all forms of fiscal integration will improve macroeconomic stability in the Eurozone.
    Date: 2012–07–07
  8. By: Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper discussed two measures of value added flows between countries ‘Trade in value added’ accounts for value added of one country directly and indirectly embodied in final consumption of another country. ‘Value added in trade’ measures the value added embodied in gross trade flows. The paper shows that both measures result in the same overall net trade of a country which equals its trade balance in gross terms which however does not hold for bilateral relations. These value added flows can further be broken down by various production factors including capital and labour income by educational attainment categories. Using the recently compiled World Input-Output Database (WIOD) selected results comparing the EU-27, the USA, Japan and China based on both concepts regarding value added flows across countries are presented. For example, the US trade deficit with China is reduced by about 25% but would increase with respect to the EU-27 by about 20%. These imbalances are further broken down by factor incomes.
    Keywords: value added trade, factor content of trade, trade integration, vertical specialization, production networks
    JEL: F1 F15 F19
    Date: 2012–06

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