nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2013‒08‒23
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Multinationals' profit response to tax differentials: Effect size and shifting channels By Heckemeyer, Jost H.; Overesch, Michael
  2. Profit shifting and 'aggressive' tax planning by multinational firms: Issues and options for reform By Fuest, Clemens; Spengel, Christoph; Finke, Katharina; Heckemeyer, Jost; Nusser, Hannah
  3. The Efficiency and Equity of the Tax and Transfer System in France By Balazs Egert
  4. Consumer Demand System Estimation and Value Added Tax Reforms in the Czech Republic By Petr Jansky
  5. Re-assessing the merits of measuring tax evasions through surveys: Evidence from Serbian firms By Kundt, Thorben C.; Misch, Florian; Nerré, Birger
  6. Keeping up with the Joneses, the Smiths and the Tanakas: Optimal Taxation with Social Comparisons in a Multi-Country Economy By Aronsson, Thomas; Johansson-Stenman, Olof

  1. By: Heckemeyer, Jost H.; Overesch, Michael
    Abstract: This paper provides a quantitative review of the empirical literature on profit-shifting behavior of multinational firms. We synthesize the evidence from 25 studies and find a substantial response of profit measures to international tax rate differentials. Accounting for misspecification biases by means of meta-regressions, we predict a tax semi-elasticity of subsidiary pre-tax profits of about 0.8. Moreover, we disentangle the tax response by means of financial planning from the transfer pricing and licensing channel. Our results suggest that transfer pricing and licensing are the dominant profit-shifting channel. --
    Keywords: Profit Shifting,Multinational Firm,Corporate Income Tax,Meta-Analysis
    JEL: H25 H26 H32
    Date: 2013
  2. By: Fuest, Clemens; Spengel, Christoph; Finke, Katharina; Heckemeyer, Jost; Nusser, Hannah
    Abstract: This paper discusses the issue of profit shifting and 'aggressive' tax planning by multinational firms. The paper makes two contributions. Firstly, we provide some background information to the debate by giving a brief overview over existing empirical studies on profit shifting and by describing arrangements for IP-based profit shifting which are used by the companies currently accused of avoiding taxes. We then show that preventing this type of tax avoidance is, in principle, straightforward. Secondly, we argue that, in the short term, policy makers should focus on extending withholding taxes in an internationally coordinated way. Other measures which are currently being discussed, in particular unilateral measures like limitations on interest and license deduction, fundamental reforms of the international tax system and country-by-country reporting, are either economically harmful or need to be elaborated much further before their introduction can be considered. --
    Keywords: tax avoidance,profit shifting,multinational firms,intellectual property,tax policy,tax reform
    JEL: H20 H25 F23 K34
    Date: 2013
  3. By: Balazs Egert
    Abstract: Taxes and cash transfers reduce income inequality more in France than elsewhere in the OECD, because of the large size of the flows involved. But the system is complex overall. Its effectiveness could be enhanced in many ways, for example so as to achieve the same amount of redistribution at lower cost. The French tax code should be simplified and changed less frequently. High statutory rates are coupled with a wide range of effective tax rates resulting from a multitude of tax expenditures. There is a need for base broadening combined with lower rates throughout the system, including VAT. The tax wedge on labour is high, except at the bottom of the wage distribution, which can reduce worker participation and job offers. Greater neutrality both across different capital asset classes but also within specific taxes, and shifting taxes from labour and capital inputs to environmental and property taxes would improve economic outcomes. Likewise, the system of social and family benefits should be simplified to enhance transparency and consistency. Eliminating schemes that let people leave the labour market early, abolishing the pension privileges of specific occupational groups and internalising the costs of survivors’ pension benefits would increase fairness while at the same time generating savings. Better labour-market performance would result from increasing job-search incentives and shortening the parental leave allowance. This Working Paper relates to the 2013 OECD Economic Review of France (
    Keywords: taxation; cash transfers; income inequality; redistribution
    JEL: D30 H20 H30 H50 H55 H70 J20 J30
    Date: 2013–04–15
  4. By: Petr Jansky (Institute for Fiscal Studies and Charles University)
    Abstract: Reforms of indirect taxes, such as the recent changes in rates of value added tax (VAT) in the Czech Republic, change prices of products and services to which households can respond by adjusting their expenditures. I estimate the behavioural response of consumers to price changes in the Czech Republic applying a consumer demand model of the quadratic almost ideal system (QUAIDS) form to the Czech Statistical Office data for the period from 2001 to 2011. I then derive the estimates of own- and cross-price and income elasticities and I use these to estimate the impact of changes in VAT rates, which were proposed or implemented between 2011 and 2013, on households and government revenues. I further find that this method, which allows for behavioural response, yields lower estimates of changes in VAT revenues than when I use the standard static simulation. These relatively small, but statistically significant differences might partly explain the past cases, and might lead to future cases, of the over-estimation of VAT revenues by the Ministry of Finance of the Czech Republic.
    Keywords: consumer behaviour, demand system, QUAIDS, value added tax, Czech Republic
    JEL: D12 H20 H31
    Date: 2013–08
  5. By: Kundt, Thorben C.; Misch, Florian; Nerré, Birger
    Abstract: This paper addresses the major weakness of measuring tax evasion through business and household surveys, namely the reluctance of respondents to answer truthfully due to the threat of disclosure. First, we assess the merits of a novel questioning method to gather information about tax evasion by means of business surveys. This approach allows estimating the prevalence of tax evasion, but it does not allow identifying whether the individual firm engages in tax evasion or not, therefore providing incentives for survey participants to answer truthfully. Second and contrary to most other business surveys, we differentiate between two common modes of tax evasion, namely underreporting of sales and informal supplements to official wages ('envelope wages'). Using evidence from Serbia, we show that the estimated share of firms which underreport sales and wages, respectively, by at least 10% is higher under the crosswise model compared to the case when conventional questioning methods applied in business surveys such as the World Bank Enterprise Surveys are used. However, the difference is only significant with respect to sales. These results appear to be robust to a number of modifications, and we explore various potential causes that lead to these results. --
    Keywords: tax evasion,shadow economy,measurement,developing countries
    JEL: H20 E62
    Date: 2013
  6. By: Aronsson, Thomas (Department of Economics, Umeå School of Business and Economics); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law)
    Abstract: Recent empirical evidence suggests that between-country social comparisons have become more important over time. This paper analyzes optimal income taxation in a multi-country economy, where consumers derive utility from their relative consumption compared with both other domestic residents and people in other countries. The optimal tax policy in our framework reflects both correction for positional externalities and redistributive aspects of such correction due to the incentive constraint facing each government. If the national governments behave as Nash competitors to one another, the resulting tax policy only internalizes the externalities that are due to within-country comparisons, whereas the tax policy chosen by the leader country in a Stackelberg game also reflects between-country comparisons. We also derive a globally efficient tax structure in a cooperative framework. Nash competition typically implies lower marginal income tax rates than chosen by the leader country in a Stackelberg game, and cooperation typically leads to higher marginal income tax rates than the non-cooperative regimes.
    Keywords: Optimal taxation; relative consumption; inter-jurisdictional comparison; asymmetric information; status; positional goods
    JEL: D03 D62 D82 H21
    Date: 2013–08–13

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