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on Accounting and Auditing |
| By: | Lindeboom, Maarten; van der Klaauw, Bas; Vriend, Sandra |
| Abstract: | We provide evidence from a large-scale field experiment on the causal effects of audit rules on compliance in a market for long-term care. In this setting care should be provided quickly and, therefore, the gatekeeper introduced ex-post auditing. Our results do not show significant effects of variations in random audit rates and switching to a conditional audit regime on the quantity and quality of applications for care. We also do not find evidence for heterogeneous effects across care providers differing in size or hospital status. Our preferred explanation for the lack of audit effects is the absence of direct sanctions for noncompliance. The observed divergence of audit rates in the conditional audit regime is the consequence of sorting and thus identifies the quality of application behavior of providers. |
| Keywords: | auditing; compliance; feedback; field experiment; long-term care |
| JEL: | C93 H51 I18 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9924&r=acc |
| By: | Ojo, Marianne |
| Abstract: | Credit ratings have assumed an increasingly formidable and important role over the years. An increased role and revisions to its foundations, have been triggered, not only in view of the shortcomings of credit ratings based criteria, as revealed through the recent Financial Crisis, but also the need to update Basel II - which has served as the foundation for credit ratings in several jurisdictions. Credit ratings serve various vital purposes, most notably of which include the determination of capital requirements, the identification and classification of assets, and the provision of reliable estimation and assessment of credit risk. The criteria required to be satisfied by credit rating agencies, namely: objectivity, independence, transparency, disclosure, resources and credibility, are closely linked, since the level of comparability and consistency of information provided by such agencies, could also serve as a useful indicator that such information is reliable and credible. In response to the changing financial environment - the evolution and emergence of new and more complex forms of risks and financial products, credit rating agencies have extended their scope beyond the coverage of their traditional products. As well as assessing whether the scope of products presently covered by rating agencies could be deemed adequately relevant to the criteria required to satisfy information being provided as credible, this paper also addresses the reliability of credit scoring methods and models. Are those measures used in estimating the probability of default, namely, financial statements, market prices of a firm’s debt and equity, and appraisals of the firm’s prospects and risk sufficiently indicative as to provide a reliable estimate of the firm's probability of default? The vital role of audits in verifying the credibility of information in financial statements is therefore evident. The reliability and consistency of credit ratings across different jurisdictions, sectors - financial, non financial sectors, and rating agencies, as well as the reliability of the approach for assessing ratings constitute major areas to be addressed. This in part, being attributed to the difficulties with achieving a balance between risk-sensitivity and comparability. The Basel III leverage ratios also being crucial to achieving an acceptable balance with risk-sensitivity - such that the capital framework is not considered unduly risk-sensitive - as was the case with Basel II. The increased importance attributed to credit ratings is also reflected by the Basel Committee’s recent introduction of the Standardized Approach (SA-CCR) for measuring exposure at default (EAD) for counter-party credit risk (CCR). The SA-CCR is intended to replace both current non-internal models approaches, the Current Exposure Method (CEM) and the Standardised Method (SM). The SA-CCR will apply to OTC derivatives, exchange-traded derivatives and long settlement transactions. Risk models have certainly become increasingly complex and relevant - however, is such level of complexity correspondingly and adequately balanced with the level of objectivity and comparability which is required within the capital framework? |
| Keywords: | credit ratings, OTC derivatives, objectivity, forecasting, assets, liquidity, risk sensitivity, leverage ratios, audits, information asymmetries |
| JEL: | D8 E3 G2 G28 K2 M4 |
| Date: | 2014–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56209&r=acc |
| By: | Juanita Villaveces |
| Abstract: | Abstract: The present document presents the general notions and the definition of property taxation and, as part of it, the working definition of rural property taxation emphasizing that property taxation is a matter of “property” and rural property taxation is linked with rural property, specifically with land ownership. In addition, the document presents some facts about the performance of property taxation based on a secondary source of cross-country analysis. In order to give a definition of rural property tax, I will explain the logic of taxation linked to property and then present the nature and logic behind property taxation in theory. |
| Keywords: | Property tax, rural taxation, property rights |
| JEL: | H20 P14 |
| Date: | 2014–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:011527&r=acc |
| By: | Masanori Orihara (Economist, Policy Research Institute, Ministry of Finance, Japan, University of Illinois at Urbana-Champaign) |
| Abstract: | Economic theory dating to Domar and Musgrave (1944) suggests that the tax treatment of gains and losses can affect firmsf incentives to undertake high-risk investments. Exploiting a 2002 tax law change in Japan that allows business groups to adopt a consolidated taxation system (CTS) and using an IV strategy, I identify the causal impact of mitigating tax loss asymmetry on R&D activities. With unique firm-level panel data between 1997 and 2011, I show that CTS adoption increases total R&D expenses among individual business groups. More specifically, CTS adoption increases the following, especially among parent companies of business groups: the number of employees engaging in R&D; expenses for property, plant, and equipment for R&D; and expenses for R&D outsourcing. Evidence of ex-ante efficiency of CTS adoption measured by market-to-book ratio is limited, while CTS adoption improves expost efficiency measured by income from patent transactions. These findings support that mitigating tax loss asymmetry facilitates efficient developments of high-risk investments in line with Domar and Musgrave. |
| Keywords: | business group, corporate income tax, loss treatment, R&D activity, instrumental variable method |
| JEL: | G30 H25 O30 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:mof:wpaper:ron254&r=acc |
| By: | Best, Michael; Brockmeyer, Anne; Kleven, Henrik; Spinnewijn, Johannes; Waseem, Mazhar |
| Abstract: | This paper analyzes the design of tax systems under imperfect enforcement. A common policy in developing countries is to impose minimum tax schemes whereby firms are taxed either on profits or on turnover, depending on which tax liability is larger. This production inefficient tax policy has been motivated by the idea that the broader turnover tax base is harder to evade. Minimum tax schemes give rise to a kink point in firms' choice sets as the tax rate and tax base jump discontinuously when one tax liability surpasses the other. Using administrative tax records on corporations in Pakistan, we find large bunching around the minimum tax kink. We show that the combined tax rate and tax base change at the kink provides small real incentives for bunching, making the policy ideal for eliciting evasion. We develop an empirical approach allowing us to put (tight) bounds on the evasion response to switches between profit and turnover taxation, and find that turnover taxes reduce evasion by up to 60-70% of corporate income. Our analysis sheds new light on the use of production-inefficient tax tools in countries with limited tax capacity and can easily be replicated in other contexts as the quasi-experimental variation needed is ubiquitous. |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9717&r=acc |
| By: | Kreiner, Claus Thustrup; Leth-Petersen, Søren; Skov, Peer Ebbesen |
| Abstract: | Intertemporal shifting of wage income takes place when income earned in one tax year is paid out in another tax year in order to save taxes. Shifting has implications for the evaluation of the distortionary and distributional effects of taxes and may cause serious bias in empirical estimates of the elasticity of taxable income (ETI) for use in policy analysis. Based on new monthly payroll records for the universe of Danish employees we provide evidence of widespread intertemporal shifting of wage income in response to a tax reform that significantly reduced the marginal tax rates for 1/4 of all employees. Ignoring shifting, we estimate the overall ETI to be 0.1 and find that the ETI is increasing in the earnings level. After controlling for shifting, we obtain negligible ETI estimates at all earnings levels. We show that shifting is concentrated on few individuals spread out evenly across industry sectors, and we provide evidence suggesting that tax salience, liquidity constraints and firm willingness to cooperate in shifting are important factors in explaining shifting behavior. |
| Keywords: | elasticity of taxable income; income shifting; monthly payroll records |
| JEL: | H24 H31 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9697&r=acc |
| By: | Michael Förster; Ana Llena-Nozal; Vahé Nafilyan |
| Abstract: | The shares of top income recipients in total pre-tax income have increased in OECD countries in the past three decades, particularly in most of the English-speaking countries but also in some Nordic (from low levels) and Southern European countries. Today, the richest one percent receives between 7% of all pre-tax income in Denmark and the Netherlands up to almost 20% in the United States. This increase is the result of the top 1% capturing a disproportionate share of overall income growth over the past thirty years: around 20 – 25% in Australia and the United Kingdom, up to 37% in Canada and even 47% in the United States. At the same time, tax reforms in almost all OECD countries reduced top personal income tax rates as well as rates of other taxes affecting the highest income earners. Indeed, while top tax rates were equal to or above 70% in half of the countries in the mid-1970s, this rate has been halved in many countries by 2013. Au cours des trois dernières décennies, la part du revenu avant impôts revenant aux titulaires de hauts revenus a augmenté au sein des pays de l’OCDE, en particulier dans la plupart des pays anglophones mais aussi dans certains pays nordiques (démarrant toutefois d’un niveau relativement bas) et certains pays du sud de l’Europe. Aujourd’hui, les un pourcent les plus riches perçoivent entre 7% du revenu individuel total avant impôts au Danemark et aux Pays-Bas et presque 20% aux États-Unis. Cette forte progression est le résultat d’un partage inéquitable des fruits de la croissance des revenus aux cours des trente dernières années. En effet, entre 20% et 25% des bénéfices de la croissance est captée par les un pourcent les plus riches en Australie et au Royaume-Uni, et jusqu’à 37% au Canada, voire 47% aux États-Unis. Dans le même temps, les réformes fiscales de la plupart des pays de l’OCDE ont été dans le sens d’une réduction des taux d’imposition et d’autres taxes affectant les plus hauts revenus. Ainsi, alors que les taux d’imposition des plus hauts revenus étaient aux alentours de 70% dans la moitié des pays de l’OCDE dans les années 70, ils sont, en 2013, réduits de moitié dans de nombreux pays. |
| JEL: | D31 D63 H20 |
| Date: | 2014–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:159-en&r=acc |
| By: | Elasrag, Hussein |
| Abstract: | This paper is one of few papers that highlight the importance of studying corporate governance for institutions offering Islamic financial services. The book is of value in describing governance in Islamic institutions and how there are many issues under the investigation process, especially issues related to the shari‘a Supervisory board and its functionality. One of the objectives of this paper is to discuss, and create greater awareness of, some of the crucial issues related to corporate governance in Islamic financial institutions. A second, but in fact more important, objective is to provide, in the light of this discussion, certain essential guidelines to improve corporate governance in these institutions and thereby enable them to not only maintain their momentum of growth and international acceptance but also safeguard the interests of all stakeholders. The paper gives particular attention to the mechanisms for corporate governance, including the Board of Directors, Senior Management, shareholders, depositors, and regulatory and supervisory authorities. It also focuses on the effective management of risks and, in particular, on creating a supporting environment through moral uplift, social, legal and institutional checks, greater transparency, internal controls, and Shari'a as well as external audit. The paper also indicates briefly the shared institutions that are needed for effective corporate governance. |
| Keywords: | Corporate governance,Islamic Finance,ISLAMIC FINANCIAL INSTITUTIONS,SHARI‘A GOVERNANCE |
| JEL: | G0 G15 G2 G21 G34 |
| Date: | 2014–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56221&r=acc |