nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2013‒07‒05
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Measuring tax attractiveness across countries By Keller, Sara; Schanz, Deborah
  2. Identifying local tax mimicking: Administrative borders and a policy reform By Baskaran, Thushyanthan
  3. Seigniorage Revenue and Inflation Tax: Testing Optimal Seigniorage Theory for Turkish Economy By dogru, bulent
  4. Personal vs. Corporate Goals: Why do Insurance Companies Manage Loss Reserves? By Fiordelisi, Franco; Meles, Antonio; Monferrà, Stefano; Starita, Maria Grazia
  5. Recent findings regarding the shift from direct to indirect taxation in the EA-17 By Bernardi, LUIGI
  6. The marginal cost of public funds in the EU: the case of labour versus green taxes By Salvador Barrios; Jonathan Pycroft; Bert Saveyn

  1. By: Keller, Sara; Schanz, Deborah
    Abstract: This paper develops a new tax measure - the Tax Attractiveness Index - reflecting the attractiveness of a country's tax environment and the tax planning opportunities that are offered. Specifically, the Tax Attractiveness Index covers 16 different components of real-world tax systems, such as the statutory tax rate, the taxation of dividends and capital gains, withholding taxes, the existence of a group taxation regime, loss offset provision, the double tax treaty network, thin capitalization rules, and controlled foreign company (CFC) rules. We develop methods to quantify each tax factor. The Tax Attractiveness Index is constructed for 100 countries over the 2005 to 2009 period. Regional clusters in the index as well as in the application of certain tax rules can be observed. The evaluation of individual countries based on the index corresponds - but is not totally identical - with the OECD's black respectively grey list. By comparing the Tax Attractiveness Index with the statutory tax rate, we reveal that even high tax countries offer favorable tax condi-tions. Hence, the statutory tax rate is not a suitable proxy for a country's tax climate in any case since countries may set other incentives to attract firms and investments. --
    Keywords: tax measure,tax attractiveness,tax planning,multinational company
    Date: 2013
  2. By: Baskaran, Thushyanthan
    Abstract: This paper exploits an exogenous reform of the local fiscal equalization scheme in the German State of North Rhine-Westphalia to identify tax mimicking by municipalities in the neighboring state of Lower Saxony. The spatial lag regressions provide no evidence for the existence of strategic interactions in municipal business and property taxes. In contrast, traditional spatial lag regressions that rely on variation in neighbors' demographic, political, or economic characteristics for identification provide strong evidence for strategic interactions. This pattern of results indicates that most of the extant literature overestimates the importance of local tax mimicking. --
    Keywords: Tax mimicking,business tax,property tax,intergovernmental equalization
    JEL: H20 H71 H77
    Date: 2013
  3. By: dogru, bulent
    Abstract: The goal of this study is to test the implication of Mankiv’s (1987) optimal seigniorage theory suggesting that in the long run higher tax rates are associated with higher inflation rates and higher nominal interest rates for Turkish Economy using time series dataset for the time period 1980-2011.We examine the long run relationship between nominal interest rates, inflation and tax revenue. For this purpose, we estimate the Mankiw’soptimal seigniorage model for Turkish Economy with the cointegration and vector error correction methods (VECM) techniques. According to econometric result, in long run there is a causality relationship from inflation and tax revenue to nominal interest rates. However, in short run we could not find any evidence that support the causality from inflation and tax revenue to nominal interest rates
    Keywords: seigniorage and inflation tax, optimal seigniorage theory, Turkish economy, error correction model, cointegration analysis
    JEL: E6 E62
    Date: 2013–06
  4. By: Fiordelisi, Franco; Meles, Antonio; Monferrà, Stefano; Starita, Maria Grazia
    Abstract: This study analyses the determining factors of reserve errors in publicly listed property and casualty insurance companies in the U.S. This subject deserves special attention because the previous literature does not control for trade-offs between executive remuneration and other incentives regarding such insurers’ discretionary accounting choices. We find that insurance managers manipulate loss reserves to increase their stock-based remuneration and to achieve corporate goals particularly those goals that relate to reducing tax burdens and obscuring financial weakness. We also observe that enactment of the Sarbanes-Oxley Act has constrained the loss reserve underestimation and changed the structure of reserve error incentives.
    Keywords: P&C insurers; reserve manipulation; executive compensation
    JEL: G22 G32 M42
    Date: 2013–06–24
  5. By: Bernardi, LUIGI
    Abstract: The relative merits of direct vs. indirect taxes have been largely debated since the advent of public finance theory. The current phase of the discussion concerns the relative ability of these two kinds of taxes to creating a more growth-friendly environment. The prevailing view favours indirect taxation, and suggests a shift of the fiscal burden towards indirect taxes, especially those on consumption. We shall be looking only briefly at this last question, as this paper has two other principal aims. The first aim is to evaluate the entity of the said tax shift over the last decade across Euro Area (EA-17) member countries. Our conclusion is that a “true” tax shift has not been as widespread and large as the EU Commission believes. Secondly, among the most widely-debated issues concerning the tax shift, we are going to examine the contrasting short-term impacts on the economy resulting from it, and we shall outline the possible risk that, in the short term, this tax shift may exacerbate the economic slump spreading across the European Union, particularly as an effect of the general adoption of restrictive fiscal policies by almost all member countries
    Keywords: Direct taxes, indirect taxes, Euro Area
    JEL: H2
    Date: 2013–06–28
  6. By: Salvador Barrios (European Commission); Jonathan Pycroft (European Commission); Bert Saveyn (European Commission)
    Abstract: One key objective of tax-based fiscal consolidations which is too often disregarded in public debate is to minimise economic distortions. This paper uses a computable general equilibrium model to gauge these potential distortions by calculating the marginal cost of public funds (MCF) for EU member states. We consider two specific tax categories which are often proposed as good candidates for efficiency-enhancing tax shifting policies: labour and green taxes. Our analysis suggests that the economic distortions provoked by labour taxes are significantly larger than for green taxes. This result suggests that a green-taxes oriented fiscal consolidation would be preferred to a labour-tax oriented one (assuming that both tax increases would yield the same tax revenues). This holds for all EU member states modelled and despite the fact that potential welfare enhancement through pollution abatement are cancelled-out. Nevertheless, this result is slightly less strong when one considers the spillover effects between countries, which are more pronounced (in relative terms) for green taxes. This suggests that the use of green taxes for fiscal consolidation would be more effective were there to be close coordination across EU countries. In addition the efficiency losses associated with labour taxes are also likely to be greater when labour markets are less flexible (from an efficiency-wage perspective), a result also found to a small extent for green taxes. This raises the possibility that undertaking structural reforms (especially in the labour market) would help to minimize the efficiency losses entailed by tax-driven fiscal consolidations.
    Keywords: European Union, Taxation, labour taxation, environment, marginal cost public funds
    JEL: H21 H23 H24
    Date: 2013–05

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