nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2013‒01‒07
fifteen papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Indirect taxation of monopolists: A tax on price By Vetter, Henrik
  2. Non-linear Effects of Taxation on Growth By Jaimovich, Nir; Rebelo, Sérgio
  3. The long run effect of taxes on the distribution of top income shares: an empirical investigation By Christoph Gorgas; Christoph A. Schaltegger
  4. Poverty-Reducing Directions of Indirect Marginal Tax Reforms in Ireland By Wasiu Adekunle Are
  5. The economics of taxing net wealth: A survey of the issues By Schnellenbach, Jan
  6. 18 billion at one blow: Evaluating Germany's twenty biggest tax expenditures By Thöne, Michael
  7. Optimal Participation Taxes and Efficient Transfer Phase-Out By Normann Lorenz; Dominik Sachs
  8. The effect of debt on corporate profitability : Evidence from French service sector By Mazen Kebewar; Syed Muhammad Noaman Ahmed Shah
  9. Financial Reporting for Joint ventures and Capital Markets Reactions By Stefana Maria Dima; Chiara Saccon
  10. La structure du capital et la profitabilit\'e: Le cas des entreprises industrielles fran\c{c}aises By Mazen Kebewar
  11. The tax shift from labor to consumption in Italy: a fiscal microsimulation analysis using EUROMOD By Andrea Taddei
  12. The Effect of Solvency Regulations and Accounting Standards on Long-Term Investing: Implications for Insurers and Pension Funds By Clara Severinson; Juan Yermo
  13. The common error of common sense: an essential rectification of the accounting approach By Kakarot-Handtke, Egmont
  14. The integrated macroeconomic accounts of the United States By Marco Cagetti; Elizabeth Ball Holmquist; Lisa Lynn; Susan Hume McIntosh; David Wasshausen
  15. Determinants of current account imbalances in the global economy: A dynamic panel analysis By Das, Debasish Kumar

  1. By: Vetter, Henrik
    Abstract: A digressive tax like a variable rate sales tax or a tax on price gives firms an incentive for expanding output. Thus, unlike unit and ad valorem taxes which amplify the harm from monopoly, a digressive tax lessens the harm. We analyse a tax on price with respect to efficiency and practical policy appeal. Using a tax on price in combination with ad valorem taxation it is possible to achieve the Ramsey solution. That is, the combination of the two taxes secures tax revenue in the least distortive way. We also show how tax reforms based only on observation of price and quantity can make use of a tax on price in order to improve welfare. That is, it is practical to use a tax on price. --
    Keywords: tax on price,ad valorem tax,tax incidence
    JEL: H21 L31
    Date: 2012
  2. By: Jaimovich, Nir; Rebelo, Sérgio
    Abstract: We study a model in which the effects of taxation on growth are highly non-linear. Marginal increases in tax rates have a small growth impact when tax rates are low or moderate. When tax rates are high, further tax hikes have a large, negative impact on growth performance. We argue that this non-linearity is consistent with the empirical evidence on the effect of taxation and other disincentives to investment and innovation on economic growth.
    Keywords: growth; taxes
    JEL: H2 O4
    Date: 2012–12
  3. By: Christoph Gorgas; Christoph A. Schaltegger
    Abstract: We provide empirical evidence on the impact of personal income taxes and tax competition on income concentration in Switzerland. The fact that Swiss cantons have considerable taxing power enables us to study the effect of differences in the tax burden as well as in the pressure of tax competition on the distribution of top income shares within Switzerland. Using panel regressions covering all 26 Swiss cantons over the years 1917 to 2007 we find substantial evidence that tax competition is a major driving force behind the cantonal tax setting behaviour shaping cantonal income concentration for the very top incomes significantly.
    Date: 2012–12
  4. By: Wasiu Adekunle Are (University College Dublin)
    Abstract: The composition of tax revenue in Ireland had changed dramatically over the past decade, with indirect taxes accounting for a large share of total tax revenue. This shift towards indirect taxation more than direct taxation tends to put excessive burden on the poor, thereby raising the concern about equity implications of the Irish indirect tax systems. In this paper, we utilize Consumption Dominance curve techniques to analyse the impact of marginal indirect tax changes on poverty in Ireland , using the Irish Household Budget Survey data of 1999 and 2005 periods. Using this technique, which is based on the theory of stochastic dominance, we examined the pairwise comparison of different combinations of commodities for both the overall population and the subgroups of population. The technique helps us to identify the directions of indirect marginal tax changes which will reduce poverty for some selected commodities over a broad class of poverty measures and poverty lines.
    Keywords: consumption dominance curve, poverty, indirect marginal tax
    JEL: D12 D63 H21 I32
    Date: 2012–12–20
  5. By: Schnellenbach, Jan
    Abstract: This paper surveys possible motivations for having a net wealth tax. After giving a short overview over the state of wealth taxation in OECD countries, we discuss both popular arguments for such a tax, as well as economic arguments. It is argued that classical normative principles of taxation known from public economics cannot give a sound justification for a net wealth tax. The efficiency-related effects are also discussed and shown to be theoretically ambiguous, while empirical evidence hints at a negative effect on GDP growth. Finally, it is argued that despite of widespread and persistent lobbying for a revitalization of the net wealth tax, this is unlikely to happen due to political economy constraints. --
    Keywords: net wealth tax,wealth,inequality,redistribution
    JEL: H24 D31 H23 H21 H22
    Date: 2012
  6. By: Thöne, Michael
    Abstract: --
    JEL: H24 H25
    Date: 2012
  7. By: Normann Lorenz (Volkswirtschaftslehre, Universität Trier, Germany); Dominik Sachs (Department of Economics, University of Konstanz, Germany)
    Abstract: We analyze the optimal design of income transfer programs with a special focus on participation taxes and the marginal tax rates in the phase-out region. The analytical framework incorporates labor supply responses along the intensive and extensive margin, where the latter is due to a minimum hours constraint. All results are expressed in reduced form, i.e. in terms of intensive and extensive labor supply elasticities. We derive a formula for the optimal participation taxes and provide a condition under which negative participation taxes are never part of the optimal tax schedule. Concerning the marginal tax rates in the phase-out region, we develop a test for a tax-transfer system to be beyond the top of the Laffer curve and thus to be (second-best) Pareto inefficient. In such a case there would be room for tax cuts (or increases in transfers) which are self-financing and therefore constitute a Pareto improvement. Applying this test to Germany, our analysis suggests that the structure of marginal tax rates in the transfer phase-out region is (second-best) Pareto inefficient.
    Keywords: Optimal taxation, participation taxes, extensive margin, Laffer curve, multidimensional screening
    JEL: H21 H23
    Date: 2012–12–17
  8. By: Mazen Kebewar (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans, University of Aleppo, Faculty of Economics - Department of Statistics and Management Information Systems); Syed Muhammad Noaman Ahmed Shah (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans)
    Abstract: Current study aims to provide new empirical evidence on the impact of debt on corporate profitability. This impact can be explained by three essential theories: signaling theory, tax theory and the agency cost theory. Using panel data sample of 2240 French non listed companies of service sector during 1999-2006. By utilizing generalized method of moments (GMM) econometric technique on three measures of profitability ratio (PROF1, PROF2 and ROA), we show that debt ratio has no effect on corporate profitability, regardless of the size of company (VSEs, SMEs or LEs).
    Keywords: Debt, GMM, Panel data, Profitability
    Date: 2012–12–10
  9. By: Stefana Maria Dima (Faculty of Economic Sciences, Vasile Goldis Western University of Arad); Chiara Saccon (Department of Management, Università Ca' Foscari Venezia)
    Abstract: Important changes have been recently brought into the field of consolidation by the IASB. With the aim of ensuring convergence between the International Financial Reporting Standards (IFRSs) and US GAAP, the new IFRS 11- concerning the accounting of interests in joint arrangements (joint operations or joint ventures) -replaced the previous IAS 31. The core argument of the present paper is that IFRSs are designed to provide relevant financial information to a wide range of users. Higher the quality of the information supplied by financial reporting, better the outcomes of the decision making process of the participants on capital markets, lower the information asymmetry within the respective markets. Thus, the working hypothesis of this paper is that the changes in financial reporting for joint ventures can reduce the information asymmetry issues; and that for this reason, the topic must be under careful scrutiny. Hence, our approach takes into consideration the recently issued IFRS 11, which is of critical importance to the nature and quality of the financial information transmitted by the issuers to the market. The expected outcome of such an analysis resides in the idea that these changes in financial reporting are a reflection of the role played by the international joint ventures on the global markets and, extensively, within the entire economic system.
    Keywords: IFRS, joint venture, capital market
    JEL: M41 M48 G14
    Date: 2012–12
  10. By: Mazen Kebewar
    Abstract: The objective of this article is to analyze the impact of capital structure on profitability. This impact can be explained by three essential theories: signaling theory, tax theory and the agency costs theory. A sample of 1846 French industrial firms are taken over the period 1999-2006, as a dynamic panel study by using the generalized method of moments (GMM). We show that capital structure has no influence on the profitability of French firms, regardless the size of the company.
    Date: 2012–12
  11. By: Andrea Taddei (University of Genoa, Italy)
    Abstract: The aim of this paper is to simulate a tax shift reform from labor to consumption in Italy and observe the distributional impact of this policy on households. The microsimulation model used is EUROMOD, which is uniquely focused on direct taxes, social contributions and benefits. Through a two steps matching between the Italian income survey (IT-SILC) and the Households Budget Survey (Indagine sui consumi delle famiglie italiane – ISTAT), the model was enriched with data on consumption and it has been possible to simulate also indirect taxes (VAT and excises). Once calculated the baseline, the reform has been simulated by a decrease in social security contributions paid by employees, compensated with a rise in standard VAT in order to obtain Government budget neutrality. The main finding is that the simulated reform increase the regressive of the system without changes in the redistribution strategies or with a more progressive income taxation. To obtain a measure of the change in households wealth, has been used the Welfare Gain index which considered both consumption and income changes. The results are also shown at regional level.
    Keywords: direct and indirect taxation, fiscal microsimulation, progressivity, tax reform, redistribution
    JEL: C81 D12 D63 H22 H31
    Date: 2012–12
  12. By: Clara Severinson; Juan Yermo
    Abstract: This report reviews recent as well as planned changes to accounting and solvency regulations affecting insurers and pension funds and how they may impact long-term investing by these institutions. The review of existing evidence focuses mainly on the impact of risk-based solvency requirements, identifying instances where such regulations may have driven changes in investment strategies and potentially led to pro-cyclical investment behaviour such as the fire-sale of assets in market downturns. The report concludes with a note of caution regarding the application of strict fair value and risk-based solvency rules.<P>Les effets des normes prudentielles et comptables sur l'investissement à long terme : conséquences pour les assureurs et les fonds de pensions<BR>Ce rapport passe en revue les modifications récentes et à venir des règles prudentielles et comptables applicables aux assureurs et aux fonds de pension, ainsi que leur impact sur les stratégies d’investissement à long terme de ces institutions. L’examen des données factuelles porte principalement sur l’impact des exigences de solvabilité fondées sur les risques, met en lumière les cas où ces règles ont pu se traduire par un ajustement des stratégies d’investissement, et potentiellement déboucher sur des comportements d’investissement procycliques, comme le bradage des actifs en période de baisse des marchés. Le rapport conclut en mettant en garde contre une application trop stricte des règles prudentielles basées sur les risques et du principe de la juste valeur.
    Keywords: accounting, pension fund, funding, defined benefit, fair value, insurer, solvency, economic value, long-term investing, comptabilité, fonds de pension, financement, juste valeur, prestations définies, assureur, solvabilité, valeur économique, investissement à long terme
    JEL: D21 E32 G01 G15 G23 G32 J33 K20 M40 M52
    Date: 2012–12–07
  13. By: Kakarot-Handtke, Egmont
    Abstract: The present paper takes the explanatory superiority of the integrated monetary approach for granted. It will be demonstrated that the accounting approach could do even better provided it frees itself from theoretically ill-founded notions like GDP and other artifacts of the equilibrium approach. National accounting as such does not provide a model of the economy but is the numerical reflex of the underlying theory. It is this theory that will be scrutinized, rectified and ultimately replaced in the following. The formal point of reference is ‘the integrated approach to credit, money, income, production and wealth’ of Godley and Lavoie.
    Keywords: new framework of concepts; structure-centric; axiom set; primacy of theory; income; profit; distributed profit; money; flow; residual; transaction matrix; general complementarity
    JEL: E01 B41
    Date: 2012–08–20
  14. By: Marco Cagetti; Elizabeth Ball Holmquist; Lisa Lynn; Susan Hume McIntosh; David Wasshausen
    Abstract: The integrated macroeconomic accounts (IMAs), produced jointly by the Bureau of Economic Analysis (BEA) and the Federal Reserve Board (FRB), present a sequence of accounts that relate income, saving, investment in real and financial assets, and asset revaluations to changes in net worth. In this paper we first provide some background information on the IMAs and on their construction. Next, we discuss the usefulness of the IMAs, focusing for instance on the evolution of household net worth and its components, a set of series that has appeared frequently in discussions of the causes and effects of the recent financial crisis. We also discuss some of the challenges associated with integrating nonfinancial and financial data sources, that is, the current and capital accounts statistics from BEA's national income and product accounts (NIPAs) and the financial account statistics from FRB's flow of funds accounts (FFAs). In the final section, we discuss future plans for improving the IMAs, including a proposed framework and methodology for breaking out the financial business sector into three subsectors: 1) Central bank, 2) Insurance and pension funds, and 3) Other financial business.
    Date: 2012
  15. By: Das, Debasish Kumar
    Abstract: This research presents an empirical investigation of the determinants of current account imbalance for the large sample of developed, emerging and developing countries during 1980-2011. Using dynamic panel GMM techniques, this study characterizes that current account balance are positively correlated with net foreign assets, trade openness and exchange rate stability and negatively associated with commodity price, real GDP growth and real effective exchange rate for the developed countries. While, among emerging countries, commodity price, real GDP growth, trade openness and de-jure capital openness is positively and net foreign asset, exchange rate stability index is negatively related with current account balance. These findings suggest that the current account determinants explain different characteristics in terms of different country groups. The results also hold Chinn and Ito (2007) and Chinn and Prasad (2003) along with three more important determinants with significant influence on current account, which have not ever considered in literature.
    Keywords: Current account Determinants; Global imbalance; Dynamic Panel GMM
    JEL: F40 F30 C33
    Date: 2012–09–30

This nep-acc issue is ©2013 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.