nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2014‒07‒13
twelve papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Reforming Capital Taxation in Italy By Luc Eyraud
  2. Reforming Tax Expenditures in Italy: What, Why, and How? By Justin Tyson
  3. Thin Capitalization Rules and Multinational Firm Capital Structure By Jennifer Blouin; Harry Huizinga; Luc Laeven; Gaetan Nicodeme
  4. Tax Reforms in the EU Member States Since the Turn of the New Century: Selected Observations By Luigi Bernardi
  5. Managing Income Tax Compliance through Self-Assessment By Andrew Okello
  6. The Tax-adjusted Q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives By Sophia Chen; Estelle Dauchy
  7. Mali: Technical Assistance Report-Audit of the Expenditure Chain By International Monetary Fund. Fiscal Affairs Dept.
  8. EU mapping: Systematic overview on economic and financial legislation By Gellings, Marcel; Jungbluth, Kai; Langenbucher, Katja
  9. Austria: Publication of Financial Sector Assessment Program Documentation—Detailed Assessment of Basel Core Principles for Effective Banking Supervision By International Monetary Fund. Monetary and Capital Markets Department
  10. Canada: Report on the Observance of Standards and Codes By International Monetary Fund. Western Hemisphere Dept.
  11. Dividend Policy and Role of Corporate Governance in Manufacturing Sector of Pakistan By Zubaida Batool; Attiya Yasmin Javid
  12. Bargaining and collusion in a regulatory relationship By Fiocco, Raffaele; Gilli, Mario

  1. By: Luc Eyraud
    Abstract: This paper reviews capital taxation issues in Italy based on a comprehensive definition encompassing taxes on income, transactions, and ownership. It discusses options to enhance the neutrality of the capital income tax system, followed by a detailed analysis of the property tax, the inheritance tax, and various transaction taxes. The paper also examines the case for replacing the set of existing taxes on financial and real assets with a single net wealth tax.
    Keywords: Taxation;Italy;Capital;Income taxes;Income distribution;Tax reforms;Tax systems;property tax, capital taxes, property taxes, taxes on capital, capital stock, tax treatment, income tax system, property taxation, tax measures, tax structure, inheritance tax, real estate tax, tax liability, taxation issues, tax purposes, tax exemptions, direct taxes, tax administration, tax collection, capital income taxation, tax deduction, income tax purposes, international tax, wealth taxes, tax on capital, taxes on income, taxes on property, optimal taxation, benefit tax, tax competition, taxation of wealth, corporate income tax, tax design, personal income tax, tax payment, tax arrangements, tax administrations, interest payments, property tax rates, marginal tax rate, progressive personal income tax, tax coordination
    Date: 2014–01–16
  2. By: Justin Tyson
    Abstract: The IMF has advised country authorities to roll back tax expenditures as a way to support fiscal consolidation efforts—urging them to evaluate tax expenditures according to clear criteria, and assessing their impact on public finances, economic efficiency, equity, and administrative and compliance costs. This paper analyzes tax expenditures in Italy, considering the extent to which tax expenditures can be considered part of an optimal tax system and possible reforms.
    Keywords: Taxes;Italy;Government expenditures;Tax systems;Tax reforms;optimal taxation, efficiency, equity, budget process, tax system, excise tax, personal income tax, double taxation, tax exemption, excise taxes, expenditure programs, tax design, corporate income tax, vat exempt, expenditure “ policies, tax deduction, income taxes, public spending, consumption taxes, tax instrument, tax liability, vat system, tax breaks, expenditure control, tax treatment, potential taxpayers, value-added taxes, revenue collection, tax advantages, tax on capital, progressive income tax system, progressive tax, tax reform, tax exemptions, expenditure reform, government expenditure
    Date: 2014–01–16
  3. By: Jennifer Blouin; Harry Huizinga; Luc Laeven; Gaetan Nicodeme
    Abstract: This paper examines the impact of thin capitalization rules that limit the tax deductibility of interest on the capital structure of the foreign affiliates of US multinationals. We construct a new data set on thin capitalization rules in 54 countries for the period 1982-2004. Using confidential data on the internal and total leverage of foreign affiliates of US multinationals, we find that thin capitalization rules significantly affect multinational firm capital structure. Specifically, restrictions on an affiliate’s debt-to-assets ratio reduce this ratio on average by 1.9%, while restrictions on an affiliate’s borrowing from the parent-to-equity ratio reduce this ratio by 6.3%. Also, restrictions on borrowing from the parent reduce the affiliate’s debt-to-assets ratio by 0.8%, which shows that rules targeting internal leverage have an indirect effect on the overall indebtedness of affiliate firms. The impact of capitalization rules on affiliate leverage is higher if their application is automatic rather than discretionary. Furthermore, thin capitalization regimes have aggregate firm effects: they reduce the firm’s aggregate interest expense but lower firm valuation. Overall, our results show than thin capitalization rules, which thus far have been understudied, have a substantial effect on the capital structure within multinational firms, with implications for the firm’s market valuation.
    Keywords: Transnational corporations;Capital;Corporate taxes;Time series;Thin capitalization rule, Multinational firm, Capital structure, Taxation., tax burdens, interest payments, tax countries, tax authorities, corporate income tax, tax competition, corporate tax rate, income tax rates, foreign tax, high-tax countries, country taxation, tax sensitivity, marginal tax rate, tax planning, effective tax rates, tax advantages, tax collection, effect of taxation, national tax journal, income shifting, tax benefits, tax increases, tax income, dividend distortions, high tax countries, corporate tax planning, higher tax rates, tax havens, foreign tax credit, tax deductible, local tax rate
    Date: 2014–01–24
  4. By: Luigi Bernardi (Università di Pavia, Italy)
    Abstract: The aim of this paper is to discuss certain critical aspects of the tax reform process that has been taking place in the EU MS since the beginning of the new century. Two separate periods may be identified here. The first -from 2000 to 2011- witnessed very few tax reforms: according to the EU Commission itself, tax reforms were episodic, sparse and generally of a limited nature, To check this hypothesis, the present paper analyzes tax trends during the period 2000-2011, both at aggregate EU level and by disaggregating such trends into those pertaining to each EU MS. In the wake of the great economic crisis, there has been a broader process of tax reform in almost all EU Member Countries, albeit characterized by a reluctance to accept the tax reforms that the European Commission has been recommending to certain specific countries for a number of years now. The final, concluding issue dealt with briefly in this paper, is that of the various obstacles to tax reforms, starting from a recent OECD study of the matter.
    Keywords: Taxation policy, Tax reforms, EU Member States
    JEL: H2 H20 H24 H25
    Date: 2014–06
  5. By: Andrew Okello
    Abstract: Modern tax administrations seek to optimize tax collections while minimizing administration costs and taxpayer compliance costs. Experience shows that voluntary compliance is best achieved through a system of self-assessment. Many tax administrations have introduced self-assessment principles in the income tax law but the legal authority is not being consistently applied. They continue to rely heavily on “desk†auditing a majority of tax returns, while risk management practices remain largely underdeveloped and/or underutilized. There is also plenty of opportunity in many countries to enhance the design and delivery of client-focused taxpayer service programs, and better engage with the private sector and other stakeholders.
    Keywords: Income taxes;Tax assessments;Tax collection;Tax legislation;Tax policy;Tax administration;Cross country analysis;income tax, tax compliance, self-assessment, risk management, Sub-Saharan Africa
    Date: 2014–03–11
  6. By: Sophia Chen; Estelle Dauchy
    Abstract: We propose a tax-adjusted q model with physical and intangible assets and estimate it with a self-collected comprehensive database of intangible assets. The presence of intangibles changes the accounting and economic measures of q. We show that when tax changes are temporary, the q model can be estimated by adjusting for the firm’s intangible stock and intangible intensity. We estimate our model using temporary investment tax incentive policies in the United States in the early 2000s. When the q-model accounts for intangible assets, the estimated investment elasticity to tax incentives is generally larger than otherwise. It is also larger for intangible-intensive firms, and increases with firm size.
    Keywords: Intangible capital;Investment;Tax incentives;Tax changes;Econometric models;investment tax incentives, intangible assets, q model of investment, bonus depreciation
    Date: 2014–06–12
  7. By: International Monetary Fund. Fiscal Affairs Dept.
    Abstract: PREFACE In response to a request from the Minister of Economy and Finance, an IMF Fiscal Affairs Department mission visited Bamako from January 7 to 21, 2014 in order to: (1) describe the expenditure chain by diagramming the circulation of information and the responsibilities of the officials involved; (2) make recommendations to streamline procedures for the various categories of expenditure (payroll, value-added tax (VAT) refunds, investments and imprest accounts); and (3) propose a roadmap for implementing the key recommendations. The mission comprised Mr. Benoit Taiclet, head of mission, and Mr. Christophe Maurin and Ms. Marie-Laure Berbach, both IMF Fiscal Affairs Department panel experts. The mission was received by Her Excellency Mrs. Bouaré Fily Sissoko, Minister of Economy and Finance, His Excellency Mr. Madani Touré, Minister Delegate responsible for the Budget, and Mr. Sidiki Traoré, Advisor to the Minister responsible for Finance, and Mr. Ousmane Coulibaly, Technical Advisor to the Minister Delegate responsible for the Budget. It held meetings with a number of officials and their colleagues: Mr. Boubacar Ben Bouillé, National Treasury and Public Accounting Director; Mr. Robert Diarra, General Director of the Budget; Mr. Alhassane Ag Hamed Moussa, National Financial Control Director; Mr. Sidi Almoctar Oumar, General Director of Public Contracting and Public Service Delegations; Mr. Kloussama Goita, President of the Accounts Section of the Supreme Court (SCCS); Mr. Amadou Ousmane Touré, Auditor General; Mr. Amadou Gadiaga, Controller General. The mission also met with representatives of civil society and the Chamber of Commerce of Bamako, and had the opportunity to discuss its conclusions and recommendations with representatives of the various development partners. The members of the mission would like to express their sincere thanks to the Office of the Minister for the organization of the work, the availability of the directors and their colleagues, and the quality and openness of the discussions. The mission would also like to thank Mr. Anton Op de Becke, IMF Resident Representative, Mr. Bakary Traore, resident economist, and Mrs. Racheeda Boukezia, IMF resident advisor at the National Treasury and Public Accounting Directorate, for their availability and assistance in the organization of the mission.
    Keywords: Government expenditures;Budgets;Government accounting;Public investment;Value added tax;Technical Assistance;Mali;
    Date: 2014–05–30
  8. By: Gellings, Marcel; Jungbluth, Kai; Langenbucher, Katja
    Abstract: In this study prepared for the ECON Committee of the European Parliament, Gellings, Jungbluth and Langenbucher present a graphic overview on core legislation in the area of economic and financial services in Europe. The mapping overview can serve as background for further deliberations. The study covers legislation in force, proposals and other relevant provisions in fourteen policy areas, i.e. banking, securities markets and investment firms, market infrastructure, insurance and occupational pensions, payment services, consumer protection in financial services, the European System of Financial Supervision, European Monetary Union, Euro bills and Coins and statistics, competition, taxation, commerce and company law, accounting and auditing. --
    Keywords: EU economic and financial services legislation
    Date: 2014
  9. By: International Monetary Fund. Monetary and Capital Markets Department
    Abstract: In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.
    Keywords: Financial Sector Assessment Program;Basel Core Principles;Banking sector;Bank supervision;Reports on the Observance of Standards and Codes;Austria;banking supervision, banking secrecy, banking system, internal audit, bank act, banking supervisors, consolidated supervision, capital requirement, holding company, deposit guarantee, banking industry, national bank, banking business, banking laws, mortgage bank, banking license, banking activities, banking regulations, liability management, banking supervisory agency, bank capital, banking union, banking authority, savings bank, capital adequacy, interbank market, banking sectors, banking legislation, bank bonds, banking [ … ] supervision, bank recapitalization, bank inspections, current liability, clearing bank, banking risk, bank crisis, external auditor, bank funding, bank profits, bank assets, banking transactions, retained earnings
    Date: 2014–01–21
  10. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.
    Keywords: Financial Sector Assessment Program;Basel Core Principles;Bank supervision;Insurance;Securities regulations;Securities markets;Reports on the Observance of Standards and Codes;Canada;risk management, banking supervision, supervisory approach, supervisory framework, legal entity, insurance business, iosco principles, prudential supervision, risk profile, supervisory practice, insurance intermediaries, accounting standards, internal audit, regulatory requirements, money laundering, information exchange, ethical standards, internal controls, international standards, adequate powers, reporting requirements, due diligence requirements, foreign authorities, beneficial ownership, prudential risks, supervisory agencies, terrorist financing, exchange information, ensuring compliance, supervisory standards, assessment criteria, financial intermediaries, licensing process, insurance supervisors, regulatory authorities, market integrity, confidentiality requirements, assessment mission, legal entities, technical capacity, due regard, life insurance, supervisory authorities, collective investment schemes, assessment process, compliance officer, supervisory process
    Date: 2014–02–03
  11. By: Zubaida Batool (Pakistan Institute of Development Economics, Islamabad); Attiya Yasmin Javid (Pakistan Institute of Development Economics, Islamabad)
    Abstract: This study examines the relationship between internal mechanisms and external mechanisms of corporate governance and dividend policy for 100 manufacturing firms listed on Karachi Stock Exchange over the period 2003 to 2011. The dividend stability model is used and the results indicate that firms follow a smooth dividend policy but are not considering the long term target dividend payout to fix their dividend policy. The positive relationship between dividend yield and corporate governance structures i.e. board composition, ownership structure, audit quality, shareholder rights etc. indicate that firms implementing corporate governance strategies pay higher dividends. The results suggest that firms earn and grow more they are capable of paying dividends. The results reveal that as economic conditions deteriorate and Pakistani firms reduce their dividend payments. As the inflation increases the nominal value of product also increases and dividend payments tend to be higher. The findings show that when firm specific factors as well as business or economic conditions factors are added along with corporate governance mechanisms in the dividend stability model the impact of corporate governance remains the same. It is concluded that good governance has strong influence on dividend policy of listed manufacturing companies listed at KSE.
    Keywords: Dividend Policy, Corporate Governance, Dividend Stability Model
    Date: 2014
  12. By: Fiocco, Raffaele; Gilli, Mario
    Abstract: We investigate regulation as the outcome of a bargaining process between a regulator and a regulated firm. The regulator is required to monitor the firm’s costs and reveal its information to a political principal (Congress). In this setting, we explore the scope for collusion between the regulator and the firm, which results in the manipulation of the regulator’s report on the firm’s costs to Congress. The firm’s bene.t of collusion arises from the higher price the efficient firm is allowed to charge when the regulator reports that it is inefficient. However, a higher price reduces the gains from trade the parties can share in the bargaining process. As a result of this trade-off, the efficient firm has a stake in collusion only if the regulator’s bargaining power in the regulatory relationship is relatively high. Then, we derive the optimal institutional response to collusion and characterize the conditions under which allowing collusion is desirable.
    Keywords: asymmetric information; auditing; bargaining; collusion; regulation.
    JEL: D73 D82 L51
    Date: 2014

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