nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2014‒06‒22
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Optimal Tax Base with Administrative Fixed Costs By Stéphane Gauthier
  2. The Effect of Capital Taxes on Household's Portfolio Composition and Intertemporal Choice: Evidence from the Dutch 2001 Capital Income Tax Reform By Zoutman, Floris T.
  3. Transfer Pricing and Debt Shifting in Multinationals By Schindler, Dirk; Schjelderup, Guttorm
  4. Accounting for Stakeholders or Shareholders? The Case of R&D Reporting By Yuan Ding; Thomas Jeanjean; Hervé Stolowy
  5. A Microsimulation model of the Slovak Tax-Benefit System By Zuzana Siebertova; Norbert Svarda; Jana Valachyova
  6. Abusive Transfer Pricing and Economic Activity By Nielsen, Søren Bo; Schindler, Dirk; Schjelderup, Guttorm
  7. Clearinghouses as Credit Regulators Before the Fed? By Jaremski, Matthew

  1. By: Stéphane Gauthier (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This note characterizes the optimal base for commodity taxation in the presence of administrative fixed costs varying across goods. For low tax rates, the optimal base only comprises commodities whose discouragement index is greater than the ratio of their administrative costs to the tax they yield. An illustration with UK data shows that a category of goods should be taxed only if the revenue generated on this category is at least ten times greater than its administrative fixed cost. The cost imputable to the category of goods taxed at the standard rate would be at most 6 percent of total VAT revenue.The administration cost associated with categories of goods currently tax free could justify exemption.
    Keywords: indirect taxation; VAT; tax base; administrative costs
    Date: 2013–12
  2. By: Zoutman, Floris T. (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: This paper estimates the effect of capital taxation on portfolio composition and savings using quasi-experimental variation generated by the Dutch 2001 capital tax reform. The reform drove a wedge between the taxation of housing and financial wealth and in addition affected the after-tax return on all assets. I use unique administrative household panel data with information on capital income, wealth and portfolio shares to exploit this variation. I derive and estimate a semi-structural model which directly relates the share invested in financial wealth to the after-tax return on financial and housing wealth. In addition, I link accumulated wealth in the reform-period to the change in the after-tax return on total wealth. Elasticities have the expected sign but are modest in size. I find some evidence for heterogeneity in the behavioral response. In particular, rich and single households seem to be more responsive in terms of both portfolio composition and wealth accumulation, than other households. The estimated elasticities can be used in capital tax models to calibrate the optimal tax rate.
    Keywords: Tax Reform; Capital Taxation of Households; Portfolio Composition; Intertemporal Behavior
    JEL: G11 G18 H24 H31
    Date: 2014–06–11
  3. By: Schindler, Dirk (Dept. of Accounting, Auditing and Law, Norwegian School of Economics); Schjelderup, Guttorm (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: There is a growing concern that governments lose substantial corporate tax revenue due to transfer pricing and debt shifting strategies. Existing literature studies debt shifting and transfer pricing separately. In practice, however, the choice of debt-to-asset ratios in affiliates and the transfer price of internal debt are interrelated management decisions that are also mutually affected by government regulation. This paper models these strategies as intertwined. We find that the tax sensitivity of the corporate tax base depends on whether debt shifting and transfer pricing are cost complements or substitutes. A second result is that stricter regulation of debt shifting and transfer pricing may have the effect of fostering such activities.
    Keywords: Multinational corporations; profit shifting; debt shifting; concealment costs
    JEL: D21 F23 H25
    Date: 2014–05–30
  4. By: Yuan Ding (CEIBS - Europe International Business School); Thomas Jeanjean (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959); Hervé Stolowy (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959)
    Abstract: Accounting numbers (and especially net income, equity or total assets) are based on conventions that are shaped by accounting standard setters. Elected choices result from a trade-off between the information needs of various stakeholders. This paper investigates how accounting choices meet the information needs of various stakeholders. Analyzing the R&D policy of Renault, one of the largest carmakers in Europe, over ten years (from 2002 to 2011), the paper illustrates how Renault modifies its R&D accounting policy from total expensing (a static convention) to capitalization (a dynamic convention), coping with the shift from State capitalism dominance to professional shareholder emphasis. Our findings are based on a content analysis of analysts' reactions to Renault accounting choices as well an extensive analysis of the documentation related to Renault (annual reports, presentations to analysts, conference call transcripts). Interestingly, while the R&D capitalization, promoted by the international accounting standard setter (the International Accounting Standards Board - IASB) in line with its advocacy of investors' interest as the principal recipient of accounting information, is supposed to help investors better understand the firm future cash flow, Renault's choice has been constantly challenged, even doubted by analysts. Our findings contradict the conventional wisdom in which shareholders should prefer dynamic conventions of accounting over static conventions while from its inception, the IASB purposely decided to favor investors over other stakeholders and promoted dynamic options of accounting choices.
    Keywords: Stakeholder, R&D capitalization, Renault, accounting
    Date: 2013–05–31
  5. By: Zuzana Siebertova (Council for Budget Responsibility); Norbert Svarda (Council for Budget Responsibility); Jana Valachyova (Council for Budget Responsibility)
    Abstract: This paper sets out in detail a microsimulation model of the Slovak tax and transfer system that builds on the existing EUROMOD platform. The objective is to give an overview of the development process, and to discuss differences relative to EUROMOD. In a validation exercise, we demonstrate that refinements to the current version of the EUROMOD can improve the match between simulated output, underlying data and official statistics. It is concluded that the model is a valid tool to conduct tax and benefit simulation exercises in the context of Slovakia.
    Keywords: microsimulation, EUROMOD, tax and benefit policy,Slovakia
    JEL: C81 I38 H24
    Date: 2014–06
  6. By: Nielsen, Søren Bo (Dept. of Economics, Copenhagen Business School); Schindler, Dirk (Dept. of Accounting, Auditing and Law, Norwegian School of Economics); Schjelderup, Guttorm (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: This paper investigates how concealment costs of transfer pricing and the probability of detection affect transfer pricing and firm behavior. We find that transfer pricing in intermediate production factors does not affect real activity of a multinational firm if the firm’s concealment effort as well as the probability of being audited by tax authorities are conditioned on the amount of shifted profits. If tax authorities rely on the standard OECD arm’s-length principle instead by reacting to a deviation of the transfer price from the market price, the multinational will for tax reasons adjust its production structure. A policy implication of the paper is that it should be preferable to condition audits on the amount of income shifted rather than on the distortion of the transfer price proper. Another policy finding is that improving the quality of tax law might be superior to higher detection effort. The former reduces profit shifting and concealment effort, whereas the latter leads to more wasteful use of resources on concealment and has an ambiguous effect on profits shifted.
    Keywords: Transfer Pricing; Firm Behavior; Tax Law
    JEL: H20
    Date: 2014–05–30
  7. By: Jaremski, Matthew (Department of Economics, Colgate University)
    Abstract: Clearinghouses were private organizations that not only had the power to audit member banks’ balance sheets and levy fines, but also provided emergency liquidity during large-scale financial panics. This paper studies how clearinghouses affected bank composition and solvency during stable periods as well as panics. An annual database of all national bank balance sheets from 1865 to 1914 indicates that national banks grew larger after the creation of a clearinghouse. Relative to the rise in assets, banks reduced their cash reserves and individual deposits and increased their loans, circulation, and interbank deposits. The analysis also shows that while clearinghouse members were less likely to fail during panics, they were more likely to fail in other periods, particularly those in non-financial centers. In this way, clearinghouses seem to have freed up additional resources during stable periods and delayed bank failures until the potential for contagion was removed.
    Keywords: Bank Regulation, Financial Panics, Clearinghouses, Bank Failure, National Banking Era
    JEL: G21 G32 N21
    Date: 2014–04–01

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