nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2013‒09‒26
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Anatomy of the VAT By Michael Keen
  2. How would the design of an alternative minimum tax impact the effective corporate tax rate in Belgium? By Daxbek, Vincent; Estache, Antonio
  3. Capital structure puzzle: the interrelationship between leverage, taxes and other micro economic factors By Sinha, Pankaj; Bansal, Vishakha
  4. Killing a Second Bird with One Stone? Promoting Firm Growth and Export through Tax Policy By Michele Bernini; Tania Treibich
  5. Belgium: Detailed Assessment of Compliance with the Basel Core Principles for Effective Banking Supervision By International Monetary Fund. European Dept.

  1. By: Michael Keen
    Abstract: This paper sets out some tools for understanding the performance of the value added tax (VAT). Applying a decomposition of VAT revenues (as a share of GDP) to the universe of VATs over the last twenty years, it emerges that developments have been driven much less by changes in standard rates than by changes in ‘C-efficiency’ (an indicator of the departure of the VAT from a perfectly enforced tax levied at a uniform rate on all consumption). Decomposing C-efficiency into a ‘policy gap’ (in turn divided into effects of rate differentiation and exemption) and a ‘compliance’ gap (reflecting imperfect implementation), results pieced together for EU members suggest that the former are in almost all cases far larger than the latter, with rate differentiation and exemptions playing roles that differ quite widely across countries.
    Keywords: Value added tax;Tax revenues;Tax rates;Value added tax, tax gaps, tax compliance
    Date: 2013–05–16
  2. By: Daxbek, Vincent; Estache, Antonio
    Abstract: The main purpose of this paper is to provide an assessment of the impact of the introduction of an alternative minimum tax (AMT) in Belgium with a focus on the impact on various distortions margins. In the process, we provide an up-to date account of the state of effective corporate taxation in the country. The current ETR is 15.7%. For a 1% of GDP increase in revenue, the ETR of an income based AMT would increase to 24.3% illustrating the potential payoff of a significant simplification of the current system. For a politically viable asset based AMT, it would roughly double the ETR. An income based AMT would somewhat reduce the distortions across sectors and firms sizes while an asset based AMT would increase it. As expected, an asset based AMT would penalize more large firms since they are more capital intensive. Small firms could actually be better off under an asset based AMT than under an income based AMT. But any decision on the AMT in Belgium is likely to be polarizing. Small firms currently represent 84% of the number of businesses, 35% of the jobs and 22.4% of the tax revenue. Large and very large firms represent less than 4% of the number of business but almost 50% of the jobs and over 60% of the tax revenue.
    Keywords: alternative minimum taxes; Belgium; corporate taxes; effective tax rates; presumptive taxation; tax avoidance
    JEL: H20 H25 H26 H32
    Date: 2013–05
  3. By: Sinha, Pankaj; Bansal, Vishakha
    Abstract: The capital structure puzzle still remains unsolved. Every year there are many incidences of firms, reporting very high and risky levels of debt ratios. Since debt has tax advantages over other sources of capital, this paper employs simulated marginal tax rate (MTR) and its variants to study the tax effects on leverage ratios of profitable Indian companies. The paper analyses three different measures of leverage; debt to asset (DAR) ratio, incremental debt to total assets ratio (DINC) and debt to capital employed (DAR1) ratio. For each measure of leverage ratio, different specifications based on four variants of MTR have been considered. The results confirm significant tax effects on debt ratios of profitable Indian companies. It was found that DINC is highly autoregressive and independent variables considered in this paper explain around 55% of the variation in DAR1. The study suggests a new measure of retained earnings (ERTA).
    Keywords: Marginal tax Rate, debt, leverage, capital structure, tax, incremental debt, debt to equity ratio, capital employed, corporate finance, financial distress
    JEL: G32 G38
    Date: 2013–08–30
  4. By: Michele Bernini; Tania Treibich
    Abstract: In this paper we test whether policies that induce tangible asset growth among domestic companies are effective in increasing their entry into export markets. We solve the endogeneity problem inherent to the empirical investigation of the growth-export relationship by adopting an instrumental variable (IV) strategy that exploits an exogenous policy variation in corporate tax (CT) rate as an instrument for firm growth. A reduction of the CT rate in France is found increasing firm size and promoting through this channel export entry. Our result is robust to two alternative identification strategies: first we compare firms that enjoyed CT reduction against those that did not benefit from it, then we exploit the differential impact of statutory rate reduction on the firm-level effective marginal and average rates of taxation (EMTR and EATR) within the group of firms eligible for tax reduction. We conclude that the fiscal lever has a direct impact on firm size and an indirect impact on export participation.
    Keywords: Export, corporate tax, firm growth, SME
    JEL: C21 C26 F14 H25 D24 D92
    Date: 2013–09
  5. By: International Monetary Fund. European Dept.
    Keywords: Bank supervision;Banking sector;Basel Core Principles;Reports on the Observance of Standards and Codes;Financial Sector Assessment Program;Belgium;
    Date: 2013–05–24

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