nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2014‒03‒30
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Accounting in Agriculture: Disclosure practices of listed firms By Rute Gonçalves; Patrícia Lopes
  2. Why integrity still constitutes the driving force behind ethical standards, the Sarbanes Oxley Act and other legislation By Marianne, Ojo
  3. How Would the Design of an Alternative Minimum Tax Impact the Effective Corporate Tax Rate in Belgium By Vincent Daxbek; Antonio Estache
  4. The taxation of nonrenewable natural resources By GAUDET, Gérard; LASSERRE, Pierre
  5. M&A and the tax benefits of debt-financing By Scheuering, Uwe
  6. Tax professionals' view of the Spanish tax system: efficiency, equity and tax planning By José Mª Durán-Cabré; Alejandro Esteller-Moré
  7. A fiscal revolution? Progressivity in the Spanish tax system, 1960-1990 By Sara Torregrosa Hetland
  8. Just a Matter of Prospect (Theory)? - The Ecological Rationality of the Traditional Accounting Principles By Eduard Braun
  9. Taxing hard-to-tax markets By Arbex, Marcelo; Mattos, Enlinson; Ogura, Laudo M.
  10. Prospect theory and tax evasion: a reconsideration of the Yitzhaki puzzle By Amedeo Piolatto; Matthew D. Rablen

  1. By: Rute Gonçalves (School of Economics and Management, University of Porto); Patrícia Lopes (School of Economics and Management, University of Porto)
    Abstract: This paper analyzes accounting in agriculture under the International Accounting Standard (IAS) 41 – Agriculture of 270 listed firms worldwide that have adopted International Financial Reporting Standards (IFRS) until 2010. Previous empirical evidence on the implementation of this standard is still very scarce. In general it shows that the disclosure level is low and that comparability is missing. In order to extend previous research on disclosure practices under the IAS 41, an index of the disclosure of biological assets is constructed and calculated based in the 2011 annual report. This paper tests several hypotheses relating the index and firm-level determinants - biological assets intensity, ownership concentration, firm size, auditor type, internationalization level, listing status, profitability and sector – and country-level determinant - legal status. This variable is measured using two different proxies, following institutional country classification, namely the dichotomy common law versus code law countries and cluster classification (Leuz, 2010). It was found that the mandatory and voluntary disclosure of biological assets is influenced by biological assets intensity, ownership concentration, firm size, sector and legal status. This paper seeks to help standard setters to better understand disclosure practices and their determinants concerning biological assets, and to develop future projects on this issue.
    Keywords: biological assets, disclosure index, financial reporting, regulation
    JEL: M41
    Date: 2014–03
  2. By: Marianne, Ojo
    Abstract: Whilst the benefits and potentials of the dual roles assumed by external auditors are emphasized, as well as the need to ensure that safeguards operating to guard against a compromise of objectivity and independence are in place, this paper also highlights the fact that even though such dual roles are appropriate in certain cases – as illustrated by justifications for limitations imposed by the Sarbanes Oxley Act and other relevant and applicable legislation – instances also persist where section 201 of Sarbanes-Oxley, with regard to internal audit outsourcing, may have been over-reactionary and may continue to hinder both companies and their auditors.
    Keywords: independence; objectivity; Sarbanes Oxley Act; FSMA section 166; non-audit services
    JEL: G2 G28 G3 K2
    Date: 2014–02–04
  3. By: Vincent Daxbek; Antonio Estache
    Date: 2013–05
  4. By: GAUDET, Gérard; LASSERRE, Pierre
    Abstract: We provide an analytical overview of the distortionary effects of some common forms of taxes faced by the nonrenewable resources sector of the economy. In the category of taxes meant specifically to capture the resource rent, we look at a specific severance tax, an ad valorem severance tax, a profit tax and a ‘lump-sum’ tax, with emphasis on their effects on the extraction decisions over time and on the initial reserves to be developed. In the category of taxes meant for all sectors of the economy, we look at the corporate income tax and its special provision for the resource sector in the form of a depletion allowance, with emphasis on the effects on the intra-industry resource extraction decisions and on the inter-industry allocation of investment.
    Keywords: Nonrenewable resources; taxation; neutrality; distortion; resource rent; capital allocation
    JEL: Q31 Q38 H21
    Date: 2013
  5. By: Scheuering, Uwe
    Abstract: The deductibility of interest expenses from the corporate tax base creates an incentive for acquiring companies to finance a takeover with debt. In this paper, I investigate the impact of profit taxation on the financing decision in corporate acquisitions for the first time for a sample of different acquirer-countries mainly in Europe. The likelihood to observe a debt-financed acquisition is found to increase in the acquirer's tax rate. In addition, I take into account that the financing decisions of particular acquisitions might not be independent from other investment decisions. Therefore, I analyze the acquirer's capital structure development around the acquisition and find an increase in the statutory tax rate by one %-point to be associated with a stronger increase in the debt ratio by 0.55 %-points during the acquisition period. --
    Keywords: M&A,Business Taxation,Capital Structure,Empirical Analysis
    JEL: G34 H25 H32
    Date: 2014
  6. By: José Mª Durán-Cabré (Universitat de Barcelona & IEB); Alejandro Esteller-Moré (Universitat de Barcelona & IEB)
    Abstract: The design of a tax system is a daunting task. Economies have become increasingly complex, which makes the design of taxes has to take into account behavioral taxpayers' responses - including mobility -, but also tax planning issues. Additionally, increasing inequality trends put more pressure on design. This complex framework increases the need of complete and constantly updated information about the functioning of the system to carry out welfare-enhancing reforms and having stable sources of public funding. It seems now the moment the Spanish tax system takes advantage of all sources of information to undertake a necessary reform. For this ambitious purpose, we aim at providing a novel source of information: the (objective) opinion of tax professionals. From a survey all over Spain, tax professionals unanimously conclude the current tax system is unfair, while the main inefficiencies, rather than due to traditional responses, come out as a consequence of tax planning and tax mobility. We hope the complete results of the survey are a useful source of information.
    Keywords: Tax reform, efficiency, equity, tax avoidance
    JEL: H20 H29
    Date: 2014
  7. By: Sara Torregrosa Hetland (Universitat de Barcelona)
    Abstract: The main objective of this paper is to calculate the distribution of the tax burden across income levels in Spain between 1960 and 1990. The chosen period covers the final years of Franco’s dictatorship and the first ones of the present parliamentary regime, and is thus meant to explore how political change was reflected on taxation. Does transition entail a fiscal revolution? Here is one case study developed and compared to other national experiences. Effective tax reform seems to have been politically blocked during the dictatorship, with public budgets growing fundamentally on the grounds of social security contributions. Democracy brought about a comprehensive transformation starting in 1977, which aimed at improving fairness (progressivity) and increasing revenue (to fund the development of the Welfare State). In this work I analyse whether the reforms entailed effective changes in the distribution of the tax burden, by imputing tax collection to taxpayers, based on income and consumption micro-data from Household Budget Surveys. The results show a persistent (albeit decreasing) regressivity in the tax system, which caused an increasingly negative redistribution of income. Pre-Tax incomes grew unequal during the period and net incomes even more so as a result: the tax reform did not fulfill its equalizing promises. The joint effect of the fiscal system, however, seems to have been slightly positive due to progressive social spending.
    Keywords: Tax system, progressivity, redistribution, income inequality
    JEL: D31 N34 N44 H23
    Date: 2014
  8. By: Eduard Braun (Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal))
    Abstract: The principles characterizing the traditional revenue-expense approach to accounting have never been “invented.” They are an institution that is the result of social evolution, not of human design. Therefore, the efforts to defend them against the balance sheet approach endorsed by standard-setters have encountered severe difficulties. The latter is based on a coherent model of the economy, namely neoclassical economics. This paper argues that a solid basis for explaining the rationale of the traditional accounting principles can be found in behavioral economics, especially in Prospect Theory. If one combines this result with a market process view of the economy, the revenue-expense approach turns out to be congenial to the organization of the market economy.
    Keywords: Financial Accounting, Prospect Theory, Fair Value, Historical Costs
    JEL: D03 M41 M48
    Date: 2014
  9. By: Arbex, Marcelo; Mattos, Enlinson; Ogura, Laudo M.
    Abstract: Tax enforcement costs constrain the government s ability to observe economic transac-tions, giving rise to hard-to-tax (HTT) markets. In these markets transactions are untaxedand consumers are better o¤ than in taxed markets. This paper studies a novel approachto combat evasion in HTT markets: consumer auditing, which rewards consumers for re-questing transaction receipts. We develop a Hotelling-type spatial model of sales taxationto analyze the welfare and distributional e¤ects of the implementation of this policy. We nd that consumer auditing allows for a lower tax rate and greater provision of the publicgood in the economy. We show that this policy not only can enhance welfare, but alsoequalize utilities of consumers across markets
    Date: 2014–02–12
  10. By: Amedeo Piolatto (Universitat de Barcelona & IEB); Matthew D. Rablen (Brunel University)
    Abstract: The standard expected utility model of tax evasion predicts that evasion is decreasing in the marginal tax rate (the Yitzhaki puzzle). The existing literature disagrees on whether prospect theory overturns the puzzle. We disentangle four distinct elements of prospect theory and find loss aversion and probability weighting to be redundant in respect of the puzzle. Prospect theory fails to reverse the puzzle for various classes of endogenous specification of the reference level. These classes include, as special cases, the most common specifications in the literature. New specifications of the reference level are needed, we conclude.
    Keywords: Prospect theory, tax evasion, Yitzhaki puzzle, stigma, diminishing sensitivity, reference dependence, endogenous audit probability, endogenous reference level
    JEL: H26 D81 K42
    Date: 2014

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