nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒09‒03
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  2. Algorithm for calculating corporate marginal tax rate using Monte Carlo simulation By Sinha, Pankaj; Bansal, Vishakha
  3. Book-tax conformity: Empirical evidence from Germany By Zinn, Benedikt; Spengel, Christoph
  4. Taxing Hotel Room Sales by Online Travel Companies: What Should Be the Appropriate Tax Base? By James Mak
  5. Do R&D tax incentives lead to higher wages for R&D workers? Evidence from the Netherlands By Lokshin, Boris; Mohnen, Pierre
  6. Income inequality, tax base and sovereign spreads By Aizenman, Joshua; Jinjarak, Yothin
  7. Tax incentives or subsidies for R&D? By Busom, Isabel; Corchuelo, Beatriz; Martinez Ros, Ester
  8. Taxing the unobservable: The impact of the shadow economy on inflation and taxation By Ummad Mazhar; Pierre-Guillaume Méon

  1. By: Lazhar El Orf (LIRSA-CRC - Laboratoire Interdisciplinaire de Recherche en Sciences de l'Action - Centre de recherche en comptabilité - Conservatoire National des Arts et Métiers (CNAM))
    Abstract: This paper presents the first results of a qualitative research about the organization of the Accounting Information Systems (AIS) of four companies operating in different contexts (two medium-sized and two large companies). Our study's main objective is to contribute to the understanding of the determinants of the integration of accounting information systems. It shows that the strategy is, beyond all other considerations, the primary determinant of integration practices of accounting systems of the companies surveyed, followed by the size and elements of context such as the system of management control. Organizations whose activities are not diversified (or monoactivity) opt more for accounting systems partially integrated or stand-alone while those whose activities are diversified prefer more diversified integrated accounting systems whose design is based on event-based approach and multidimensional accounting (Sorter 1969). The integration of accounting subsystems seems to be part of the mechanisms developed by diverse organizations to manage / control their very different structures. Hence, the theory of differentiation-integration (Lawrence and Lorsch 1969) explains very well the practical integration of accounting systems observed. Our study leads to a typology of modes of integration of accounting systems: (1) Conventional two-dimensional system, (2) Quasi-integrated centralized system (3) Integrated system, (4) Multidimensional system.
    Keywords: AIS, Theory of differentiation-integration, event-based approach, ERP, two-dimensional system, quasi-integrated system, integrated system, multidimensional system.
    Date: 2012–06–14
  2. By: Sinha, Pankaj; Bansal, Vishakha
    Abstract: Simulated marginal tax rates involve complex calculations of simulating future (uncertain) incomes and mimicking corporate tax code. This paper develops two algorithms to calculate simulated marginal tax rate. The codes have been developed to forecast future taxable income of Indian companies and their Marginal Tax Rates (MTR) using Monte Carlo simulation in MATLAB. Loss carry forward and minimum alternate tax rules have been incorporated in both the algorithms. Further, a change is made in both the algorithms to incorporate loss carry backward feature to suit the needs of the country where such laws are applicable. The 10000 simulations in MATLAB suggest that MTR is company specific and it is dependent on the income pattern of the company. The MTR increases when loss carry backward rule is applied. In cases where the company actually pays zero tax in a year due to incurred losses, it is found that even in such cases MTR may be non zero. It is found that there is enough cross sectional and time series variations in MTR, therefore, the effect of tax rates on various policy issues of government and companies can be studied by taking MTR as an effective proxy for tax rates.
    Keywords: Marginal tax Rate; Corporate taxes; Loss carry forward; Alternate minimum tax; Loss carry backward; Tax code
    JEL: C6 C63 G38 C15 K34
    Date: 2012–07–20
  3. By: Zinn, Benedikt; Spengel, Christoph
    Abstract: We use a unique matched tax return-financial statement data set to examine the magnitude and sources of book-tax differences in Germany. For the first time, the data set enables us to evaluate the extent to which financial and tax accounting differ in Germany in the most accurate manner. Despite the close link between financial and tax accounting in Germany, we find that corporate taxable income and income reported to shareholders diverge considerably. Regression results suggest that this reporting gap is largely attributable to legal differences between financial and tax accounting and we cannot provide evidence that tax aggressive reporting adds to it. However, further analyses show that firms actively engaged in corporate restructuring exhibit larger book-tax differences than other firms. We interpret this result as evidence of firms willing to give up the administrative advantages of a one-book accounting system in order to achieve desired tax or financial accounting result, if book-tax conformity is not required. Thus, the results not only provide insights into the relatively unexplored area of behavioral response to changes in the degree of book-tax conformity, but also add a new perspective to the discussion surrounding the implementation of the German Accounting Law Modernization Act (BilMoG) in 2010. --
    Keywords: book-tax conformity,book-tax differences,tax planning
    JEL: H20 H25 M41
    Date: 2012
  4. By: James Mak (UHERO, University of Hawaii at Manoa)
    Abstract: This essay examines the current dispute between state and local governments in the U.S. and online travel companies (OTCs) over the appropriate hotel occupancy tax base for online hotel bookings. It addresses the question of what should be the appropriate tax base in designing hotel occupancy tax statutes. It argues that the appropriate tax base should be the full rental prices of the hotel rooms paid by consumers inclusive of online travel company markups and service fees and not the discounted net rates paid by the OTCs to their hotel suppliers.
    Keywords: Hotel Occupancy Tax, Online Travel Companies, Merchant Model
    JEL: Q20 Q25
    Date: 2012–07
  5. By: Lokshin, Boris (UNU-MERIT/MGSoG, and School of Business and Economics, Maastricht University); Mohnen, Pierre (UNU-MERIT/MGSoG, and School of Business and Economics, Maastricht University)
    Abstract: This paper examines the impact of the Dutch R&D tax incentive scheme on the wages of R&D workers. We construct firm specific R&D tax credit rates that vary over time following variations in the Dutch R&D tax incentive program. Using instrumental variables we estimate a wage-sharing model with an unbalanced firm-level panel data covering the period 1997-2004. The elasticity of the R&D wage with respect to the fraction of the wage supported by the fiscal incentives scheme is estimated at 0.2 in the short run and 0.24 in the long run.
    Keywords: O32, O38, H25, J30, C23
    Date: 2012
  6. By: Aizenman, Joshua; Jinjarak, Yothin
    Abstract: This paper investigates the association between greater income inequality, de-facto fiscalspace, and sovereign spreads. Using data from 50 countries in 2007, in 2009 and in 2011, wefind that higher income inequality is associated with a lower tax base, lower de-facto fiscalspace, and higher sovereign spreads. The economic magnitude of these effects is rather large: anincrease in the Gini coefficient of inequality by 1 (in a scale of 0-100), is associated in 2011 witha lower tax base of 2 percent of the GDP, and with a higher sovereign spread of 45 basis points
    Keywords: Economics, Income inequality, tax-base, Fiscal space, sovereign spreads
    Date: 2012–06–01
  7. By: Busom, Isabel (Universitat Autonoma de Barcelona); Corchuelo, Beatriz (Universidad de Extremadura); Martinez Ros, Ester (UNU-MERIT/MGSoG, and Universidad Carlos III de Madrid)
    Abstract: This paper studies whether firms' use of R&D subsidies and R&D tax incentives are correlated to two sources of underinvestment in R&D, financing constraints and appropriability. We find that financially constrained SMEs are less likely to use R&D tax credits and more likely to obtain subsidies. SMEs using legal methods to protect their intellectual property are more likely to use tax incentives. Results are ambiguous for large firms. For both having previous experience in R&D increases the likelihood of using tax incentives, while it reduces the likelihood of using exclusively subsidies, suggesting that the latter induce entry into R&D. Results imply that direct funding and tax credits do not have the same ability to address each source of R&D underinvestment, and that on average subsidies may be better suited than tax credits at least for SMEs. From a policy perspective these tools may be complements rather than substitutes
    Keywords: Research and Development, R&D, tax incentives, subsidies, policy mix
    JEL: H25 L60 O31
    Date: 2012
  8. By: Ummad Mazhar; Pierre-Guillaume Méon
    Abstract: We test the notion that a government may rely less on taxes and more on inflation to finance its expenditures the larger the size of the shadow economy. In a sample of developed and developing countries over the 1999-2007 period, we indeed report a negative relation between the tax burden and the size of the shadow economy, and a positive relation between inflation and the size of the shadow economy. We provide evidence that both are conditional on central bank independence and the exchange rate regime. Both survive a series of robustness checks, controlling for reverse causality, simultaneity, level of development, and estimates of the shadow economy.
    Keywords: Shadow economy; Inflation; Taxes; Inflation tax
    JEL: O17 E52 H26 H27
    Date: 2012–08

This nep-acc issue is ©2012 by Alexander Harin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.