nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒10‒13
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Territoriality, Worldwide Principle, and Competitiveness of Multinationals: A Firm-level Analysis of Tax Burdens. By Giorgia Maffini
  2. The Effect of Tax Rates and Tax Bases on Corporate Tax Revenues: Estimates with New Measures of the Corporate Tax Base By Laura Kawano; Joel Slemrod
  3. Income Taxation and Business Incorporation: Evidence from the Early Twentieth Century By Li Liu
  4. Measuring Revenue Responses to Tax Rate Changes in Multi-Rate Income Tax Systems: Behavioural and Structural Factors By Creedy, John; Gemmell, Norman
  5. Revenue-Maximising Elasticities of Taxable Income in Multi-Rate Income Tax Structures By Creedy, John; Gemmell, Norman

  1. By: Giorgia Maffini (Centre for Business Taxation, University of Oxford)
    Abstract: Using consolidated firm-level accounting data for about 3,400 companies in 15 OECD countries from ORBIS (2003-2007), this paper compares the tax burden of companies headquartered in worldwide countries with that of companies headquar- tered in territorial countries. The tax burden is measured by a marginal effective tax rate (METR) and, employing a new methodology, by a marginal eective tax base (METB) which controls for statutory corporate tax rates. A higher METR for entities headquartered in worldwide jurisdictions is explained by higher corporate statutory tax rates rather than by the difference in the taxation of foreign profits. The METB of companies headquartered in worldwide countries is not statistically different from that of companies headquartered in territorial countries. Using corporate presence in tax havens, the paper also investigates the vulnerability of territorial jurisdictions to tax avoidance. The results show that offshore low-tax operations reduce the METR and the METB of multinationals more in territorial systems than in worldwide systems.
    Keywords: Corporation Income Tax; Multinationals; Territoriality; Worldwide Principle; Profit Shifting; Tax Avoidance; Tax Havens
    JEL: F23 H25 H32
    Date: 2012
  2. By: Laura Kawano; Joel Slemrod
    Abstract: Several recent analyses have suggested that the revenue-maximizing corporate tax rate resides in the low-30's. We challenge this result by re-examining this relationship using a new compilation of changes in corporate tax base definitions for OECD countries between 1980 and 2004. By considering tax base changes in addition to tax rate changes, we can address the estimation bias that applies to tax rates absent their consideration. We find that the relationship between corporate tax rates and corporate tax revenues is tenuous. The large behavioral response to corporate tax rates implied in the literature does not obtain when accounting for persistent differences in tax policy and business environments across countries.
    JEL: H25
    Date: 2012–10
  3. By: Li Liu (Centre for Business Taxation, University of Oxford)
    Abstract: If the corporate income tax is set at a different rate from non-corporate income tax, it can play an important role in a firm's choice of organizational form. The impact and interdependency of income tax incentives are crucial factors to take into account when designing efficient tax policies. In this paper I exploit the substantial variation in income taxes across U.S. states in the early twentieth century to estimate these sensitivities. The potential endogeneity of state taxes is addressed using an IV approach. The results demonstrate that the relative taxation of corporate to personal income has a significant impact on the corporate share of economic activities. Raising the entrepreneur's tax cost of incorporation by 10% decreases the mean corporate share of economic activities by about 11-18%. In addition, higher personal tax rates may affect the share of corporate activities through tax evasion and tax progressivity.
    Keywords: Corporate income tax; Personal income tax; Incorporation; Early Twentieth Century
    JEL: H25 H32 H71
    Date: 2012
  4. By: Creedy, John; Gemmell, Norman
    Abstract: This paper shows how income changes in response to changes in marginal income tax rates (MTRs) translate into tax revenue changes for the familiar multi-step income tax function used in many countries. Previous literature has focused on the relatively straightforward case of a proportional income tax or the top MTR only. The paper examines revenue responses at both the individual and aggregate levels, and it is shown that for individual MTRs within a multi-rate regime, simple expressions for tax revenue responsiveness can be derived that nevertheless capture the various behavioural and structural responses to income tax reforms involving changes to multiple rates and thresholds. Illustrations are provided using changes to the New Zealand income tax structure in the 2010 Budget. This reduced all marginal tax rates while leaving income thresholds unchanged.
    Keywords: Income Tax Revenue, Elasticity of taxable income, revenue elasticity,
    Date: 2012–09–24
  5. By: Creedy, John; Gemmell, Norman
    Abstract: The empirical literature on the elasticity of taxable income (ETI) sometimes questions whether estimated values are consistent with being on the revenueincreasing section of the Laffer curve, usually in the context of a single rate tax system or for top marginal rates. This paper develops conceptual expressions for this ‘Laffer-maximum’ or revenue-maximising ETI for the multi-rate income tax systems commonly used in practice. Using the New Zealand income tax system in 2010 to illustrate its properties, the paper demonstrates that a wide range of revenue-maximising ETI values can be expected across individual taxpayers, across tax brackets and in aggregate.
    Keywords: Income Tax Revenue, Elasticity of taxable income, revenue elasticity, Laffer Curve,
    Date: 2012–09–24

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