nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2014‒03‒15
five papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Transparency in financial reporting: Is country-by-country reporting suitable to combat international profit shifting? By Evers, Maria Theresia; Meier, Ina; Spengel, Christoph
  2. Corporate Taxes and the Growth of the Firm By Federica Liberini
  3. Effective Marginal Tax Rates for Low- and Moderate-Income Workers By Congressional Budgete Office
  4. A Complete Example of an Optimal Two-Bracket Income Tax By Jean-Francois Wen
  5. The Distribution of Household Income and Federal Taxes, 2008 and 2009 By Congressional Budget Office

  1. By: Evers, Maria Theresia; Meier, Ina; Spengel, Christoph
    Abstract: Aggressive tax planning efforts of highly profitable multinational companies (Base Erosion and Profit Shifting (BEPS)) have recently become the subject of intense public debate. As a response, several international initiatives and parties have called for more transparency in financial reporting, especially by means of a country-specific reporting of certain tax information (Country-by-Country Reporting (CbCR)). In our paper, we demonstrate that neither consolidated nor individual financial accounts seem to be an appropriate platform to provide such country-specific information and, therefore, that CbCR cannot be based on extended financial accounting standards. Moreover, we argue that even separate CbCR templates do not prevent multinationals from profit shifting, since their common tax minimization strategies are mainly based on the legal exploitation of gaps and loopholes in national and international tax law. In that regard, we show that expected costs for CbCR would exceed expected benefits and therefore contend that CbCR cannot be regarded as a convincing measure to combat international profit shifting. Instead, we argue that tax legislators should limit profit shifting by enforcing national and international tax rules and by closing gaps in tax law. In particular, we call for more tightened and standardized transfer pricing regulations to be adopted at an international level. --
    Keywords: tax avoidance,profit shifting,multinational firms,tax reform,tax reporting,country-by-country reporting,international transfer pricing
    JEL: H20 H26 F23 K34 M41
    Date: 2014
  2. By: Federica Liberini (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: It is desirable to reduce the number of "artificial" merger and acquisitions (MA) designed to escape from high tax jurisdictions, without discouraging domestic firms from growing into highly productive multinational corporations. This paper studies the effect of corporate taxes on the headquarter's decision to expand its extensive margins through the acquisition of pre-existing firms. A model for the investment behaviour of heterogeneous firms is built, and Corporate taxes are introduced. The model shows that higher home statutory corporate tax rates make exports relatively more expensive, making firms more likely to serve foreign demand through cross-border acquisitions. The model's predictions are tested on a dynamic random parameter probit model estimated on firm-level data. The model's predictions are confirmed by the results from the empirical investigation. The data also support the hypothesis that there are sunk costs associated with becoming a multinational corporation, and that domestic firm that overcome these costs and acquire their first foreign subsidiary are more likely to complete further acquisitions. In addition, the inability to shift profit to foreign locations makes domestic firms more sensitive to home corporate taxes, as their capacity to capture investment opportunity is negatively affected by a reduction in net tax profit.
    Keywords: Corporate Taxation, Merger and Acquisitions, Dynamic Probit Model
    JEL: C25 G34 H25 H32
    Date: 2014–03
  3. By: Congressional Budgete Office
    Abstract: Effective marginal tax rates among low- and moderate-income workers are about 30 percent, on average, with about one-third of that rate stemming from the federal income tax, more than a third from federal payroll taxes, and the remainder from state income taxes and the phaseout of SNAP benefits (formerly known as food stamps).
    Date: 2012–11–15
  4. By: Jean-Francois Wen (University of Calgary)
    Abstract: I provide a simple model that is solved analytically to yield tidy expressions for the Pareto efficient tax structures and the optimal two-bracket marginal tax rates. It is for the special case of equally-sized groups of two skill types and no exogenous spending requirements of the government. The results and the exposition give a self-contained treatment of the central ideas of optimal income taxation.
    Date: 2014–03–07
  5. By: Congressional Budget Office
    Abstract: The recent recession has had a substantial impact on income, the amount of taxes owed, and average tax rates. Changes in households’ before-tax income and average tax rates in 2008 and 2009 were substantial and differed markedly across the income distribution.
    Date: 2012–07–10

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