nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2013‒09‒28
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Taxing Immovable Property Revenue Potential and Implementation Challenges By John Norregaard
  2. Taxation, Bank Leverage, and Financial Crises By Ruud A. de Mooij; Michael Keen; Masanori Orihara
  3. Average Marginal Labor Income Tax Rates under the Affordable Care Act By Casey B. Mulligan
  4. Fiscal Reform and Government Debt in Japan: A Neoclassical Perspective By Gary Hansen; Selo Imrohoroglu
  5. Do Managers Do Good with Other People's Money? By Ing-Haw Cheng; Harrison Hong; Kelly Shue
  6. Basel III, BIS and Global Financial Governance By Khan, Haider
  7. Toward A Sustainable and Inclusive Consolidation in Lithuania: Past Experience and What is Needed Going Forward By Nan Geng
  8. The Effect of Accounting Conservatism on Corporate Investment Behavior By Ishida, Souhei; Ito, Kunio

  1. By: John Norregaard
    Abstract: The tax on immovable property has been characterized as probably the most unpopular among tax instruments, in part because it is salient and hard to avoid. But economists continue to emphasize the virtues of the property tax owing to its relatively low efficieny costs, benign impact on growth, and high score on fairness. It is, therefore, generally considered to be underutilized in most countries. This paper takes stock of the arguments for using real property taxation, and presents an updated data-set for high-and middle income countries to illustrate its use. It also reflects the renewed and widespread interest in property tax reform globally, and discusses the many policy and administrative issues that must be carefully considered as prerequisites for successful property tax reform.
    Keywords: Property taxes;Developing countries;Transition economies;Tax revenues;Tax reforms;immovable property tax, recurrent property tax
    Date: 2013–05–29
  2. By: Ruud A. de Mooij; Michael Keen; Masanori Orihara
    Abstract: That most corporate tax systems favor debt over equity finance is now widely recognized as, potentially, amplifying risks to financial stability. This paper makes a first attempt to explore, empirically, the link between this tax bias and the probability of financial crisis. It finds that greater tax bias is associated with significantly higher aggregate bank leverage, and that this in turn is associated with a significantly greater chance of crisis. The implication is that tax bias makes crises much more likely, and, conversely, that the welfare gains from policies to alleviate it can be substantial—far greater than previous studies, which have ignored financial stability considerations, suggest.
    Keywords: Tax systems;Corporate taxes;Banks;Financial crisis;Corporate sector;Taxation;Bank taxation; corporate tax; debt bias; leverage
    Date: 2013–02–25
  3. By: Casey B. Mulligan
    Abstract: The Affordable Care Act includes four significant, permanent, implicit unemployment assistance programs, plus various implicit subsidies for underemployment. Every sector of the economy, and about half of nonelderly adults, is directly affected by at least one of those provisions. This paper calculates the ACA’s impact on the average reward to working among nonelderly household heads and spouses. The law increases marginal tax rates by an average of five percentage points (of employee compensation), on top of the marginal tax rates that were already present before the it went into effect. The ACA’s addition to labor tax wedges is roughly equivalent to doubling both employer and employee payroll tax rates for half of the population.
    JEL: E24 H31 I18 I38
    Date: 2013–08
  4. By: Gary Hansen; Selo Imrohoroglu
    Abstract: Past government spending in Japan is currently imposing a significant fiscal burden that is reflected in a net debt to output ratio near 150 percent. In addition, the aging of Japanese society implies that public expenditures and transfers payments relative to output are projected to continue to rise until at least 2050. In this paper we use a standard growth model to measure the size of this burden in the form of additional taxes required to finance these projected expenditures and to stabilize government debt. The fiscal adjustment needed is very large, in the range of 30-40% of total consumption expenditures. Using a distorting tax such as the consumption tax or the labor income tax requires either tax to rise to unprecedented highs, although the former is much less distorting than the latter. The extremely high tax rates we find highlight the importance of considering alternatives that attenuate the projected increases in public spending and/or enlarge the tax base.
    JEL: E2 E62 H6
    Date: 2013–09
  5. By: Ing-Haw Cheng; Harrison Hong; Kelly Shue
    Abstract: We find support for two key predictions of an agency theory of unproductive corporate social responsibility. First, increasing managerial ownership decreases measures of firm goodness. We use the 2003 Dividend Tax Cut to increase after-tax insider ownership. Firms with moderate levels of insider ownership cut goodness by more than firms with low levels (where the tax cut has no effect) and high levels (where agency is less of an issue). Second, increasing monitoring reduces corporate goodness. A regression discontinuity design of close votes around the 50% cut-off finds that passage of shareholder governance proposals leads to slower growth in goodness.
    JEL: D03 G02 G10 G3 G39
    Date: 2013–09
  6. By: Khan, Haider
    Abstract: This paper analyzes the following aspects of global financial governance: • Proposed BASEL III reforms for more stringent capital requirements and their implications for the developing world in particular. • BIS proposals for better regulation of financial derivatives, including commodities futures, by moving away from OTC transactions towards organized exchanges. The Basel reforms and the BIS proposals for regulating the derivatives markets have many positive features. However, they have not been designed with the needs of DCs and LDCs in mind. The consequences of Basel I and II and proposed Basel III are analyzed from the perspective of the developing countries. It turns out that specific concerns of developing countries have not received adequate attention within the Basel Reform Initiatives and more can be and needs to be done.
    Keywords: dynamic complex adaptive economic systems; finance for development; financial architectures; financial crises; regional cooperation; BASEL III reforms; the BIS proposals
    JEL: F3 O1 P1
    Date: 2013–08
  7. By: Nan Geng
    Abstract: This paper reviews Lithuania’s fiscal consolidation since 2009, assesses the contribution of revenue and expenditure to the consolidation, evaluates the quality of measures, and draws lessons for the future. It finds that, despite having the lowest revenue-to-GDP ratio in the EU, Lithuania’s fiscal adjustment has so far relied mainly on expenditure measures, with the quality of measures deteriorating over time. The analysis also suggests that Lithuania’s tax system, in comparison with other EU countries and regional peers, is skewed toward labor and consumption taxes, and plays a more limited role in income redistribution, especially in the upper income brackets. The paper argues therefore that there is ample scope to implement high quality revenue measures in order to complete the fiscal adjustment in the medium term in a sustainable and inclusive manner.
    Keywords: Fiscal consolidation;Lithuania;Fiscal policy;Tax structures;Income distribution;Tax system reviews;Lithuania, fiscal consolidation, composition and quality of measures, sustainability and inclusiveness, income redistribution, wealth taxation
    Date: 2013–07–03
  8. By: Ishida, Souhei; Ito, Kunio
    Abstract: We examine how two types of conservatism—conditional conservatism and unconditional conservatism—affect corporate investment behavior. Conditional conservatism forces managers to recognize the loss resulting from an investment project on a timely basis. When risk-averse managers are aware that their reputation and compensation are affected adversely by recognizing the loss resulting from project failure, they are less likely to undertake the project ex ante despite its positive net present value (NPV). Thus, conditional conservatism probably inhibits corporate investment behavior. In contrast, unconditional conservatism mitigates a firm’s earning volatility, especially downward volatility, by providing an accounting slack. Thus, it is likely that unconditional conservatism promotes corporate investment behavior. Using a large sample of Japanese companies, we empirically analyze how conditional conservatism and unconditional conservatism affect corporate investment behavior. These results suggest that although firms with higher conditional conservatism take more negative investment initiatives, those firms with higher unconditional conservatism take more positive investment initiatives.
    Keywords: Conservatism, Conditional Conservatism, Unconditional Conservatism, Corporate Behavior, Capital Investment
    Date: 2013–09

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