nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2013‒01‒26
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The right-wing power of small countries By Franto Ricka
  2. Asymmetric and Non-atmospheric Consumption Externalities, and Efficient Consumption Taxation By Paul Eckerstorfer; Ronald Wendner
  3. Simplifying Tax Incentives and Aid for College: Progress and Prospects By Susan Dynarski; Judith Scott-Clayton; Mark Wiederspan
  4. Planning Optimal From the Firm Value Creation Perspective Levels of Operating Cash Investments By Grzegorz Michalski
  5. Value-Based Inventory Management By Grzegorz Michalski

  1. By: Franto Ricka (EBRD)
    Abstract: This paper investigates the political implications of tax competition between countries of different sizes. We show that smaller countries competing for internationally mobile capital would set lower tax rates than their larger counterparts when run by similar governments. Moreover, small-country governments are actually politically to the right of those in larger countries, adding a second reason for lower tax rates in the former. Then a higher number of small countries competing for capital with large countries not only decreases the large-country tax rates on capital, but also results in more right-wing governments being elected. Small countries thus have ”right-wing power”.
    Keywords: tax competition, government, elections
    JEL: D72 F5
    Date: 2012–12
  2. By: Paul Eckerstorfer (University of Linz); Ronald Wendner (Karl-Franzens University of Graz)
    Abstract: We analyze the effects of a generalized class of negative consumption externalities (asymmetric and non-atmospheric) on the structure of efficient commodity tax programs. Households are not only concerned about consumption reference levels - that is, they gain utility from "keeping up with the Joneses" - they also exhibit altruism. Two sets of efficient tax regimes are compared, based, on a welfarist- and a non-welfarist optimality criterion, respectively. Altruism turns out not to be at odds with the consumption externalities. Rather, altruism implicates a bound on efficient utility allocations. A non-welfarist government tolerates less inequality than a welfarist one. In the welfarist (non-welfarist) case, first-best personalized commodity tax rates respond highly sensitively (barely) to whether or not a consumption externality is asymmetric or non-atmospheric. If personalized commodity tax rates are not available (second-best case), the tax rate on a non-positional good is typically different from zero for corrective reasons. For plausible functional forms and parameter values, numerical simulations suggest that second-best tax rates are rather insensitive with respect to both the optimality criterion and the "nature" of the consumption externality.
    Keywords: Consumption externality, Keeping up with the Joneses, Optimal (commodity) taxation, Genuine altruism, non-welfarist government
    JEL: D62 H21 H23
    Date: 2013–01
  3. By: Susan Dynarski; Judith Scott-Clayton; Mark Wiederspan
    Abstract: The application for federal student aid is longer than the tax returns filled out by the majority of US households. Research suggests that complexity in the aid process undermines its effectiveness in inducing more students into college. In 2008, an article in this journal showed that most of the data items in the aid application did not affect the distribution of aid, and that the much shorter set of variables available in IRS data could be used to closely replicate the existing distribution of aid. This added momentum to a period of discussion and activity around simplification in Congress and the US Department of Education. In this article, we provide a five-year retrospective of what's changed in the aid application process, what hasn't, and the possibilities for future reform. While there has been some streamlining in the process of applying for aid, it has fallen far short of its goals. Two dozen questions were removed from the aid application and a dozen added, reducing the number of questions from 127 to 116. Funding for college has also been complicated by the growth of a parallel system for aid: the tax system. A massive expansion in federal tax incentives for college, in particular the American Opportunity Tax Credit, has led to millions of households completing paperwork for both the IRS and the US Department of Education in order to qualify for college funding.
    JEL: I22
    Date: 2013–01
  4. By: Grzegorz Michalski
    Abstract: The basic financial purpose of corporation is creation of its value. Liquidity management should also contribute to realization of this fundamental aim. Many of the current asset management models that are found in financial management literature assume book profit maximization as the basic financial purpose. These book profit based models could be lacking in what relates to another aim like maximization of enterprise value. The corporate value creation strategy is executed with a focus on risk and uncertainty. Firms hold cash for a variety of reasons. Generally, cash balances held in a firm can be called considered, precautionary, speculative, transactional and intentional. The first are the result of management anxieties. Managers fear the negative part of the risk and hold cash to hedge against it. Second, cash balances are held to use chances that are created by the positive part of the risk equation. Next, cash balances are the result of the operating needs of the firm. In this article, we analyze the relation between these types of cash balances and risk. This article presents the discussion about relations between firm net working investment policy and as result operating cash balances and firm value. This article also contains propositions for marking levels of precautionary cash balances and speculative cash balances. Application of these propositions should help managers to make better decisions to maximize the value of a firm.
    Date: 2013–01
  5. By: Grzegorz Michalski
    Abstract: The basic financial purpose of a firm is to maximize its value. An inventory management system should also contribute to realization of this basic aim. Many current asset management models currently found in financial management literature were constructed with the assumption of book profit maximization as basic aim. However these models could lack what relates to another aim, i.e., maximization of enterprise value. This article presents a modified value-based inventory management model.
    Date: 2013–01

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