nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2014‒10‒03
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Integrating VAT into EUROMOD. Documentation and results for Belgium By Decoster, André; Ochmann, Richard; Spiritus, Kevin
  2. Europe's Fatal Affair with VAT By Mason Gaffney
  3. Estimation of Firms' Default Rates in terms of Intangible Assets By Saiki Tsuchiya; Shinichi Nishioka
  4. Tax Competition and Tax Coordination in the European Union: A Survey By Keuschnigg, Christian; Loretz, Simon; Winner, Hannes
  5. The distributional effects of personal income tax expenditure By Avram, Silvia
  6. Personal Income Tax Reforms: a Genetic Algorithm Approach By Matteo Morini; Simone Pellegrino
  7. Are tax incentives attracting more foreign direct investments in Asia and the Pacific? By Steve Gui-Diby
  8. Bangladesh - Revenue Mobilization Program for Results: VAT Improvement Program Technical Assessment By World Bank
  9. The Economics Of Structured Leasing By João Pinto; Luís K. Pacheco
  10. Corrupción, desigualdad y evasión de impuestos By Elvio Accinelli; Edgar J. Sánchez Carrera

  1. By: Decoster, André; Ochmann, Richard; Spiritus, Kevin
    Abstract: This paper documents the integration of microsimulation tools for direct taxation, indirect taxation, and social benefits in the context of the European tax and benefit simulator, EUROMOD. Integration has been developed in parallel for two countries: Belgium and Germany. The paper at hand documents the process and presents simulation results for the case of Belgium. An integrated database underlying EUROMOD that contains householdlevel information on income and consumption is generated. Consumption micro data from the 2009 cross section of the household budget survey for Belgium is used to impute information on spending for durable and non-durable commodities into EU-SILC data, applying regression-based imputation techniques. Engel curves are estimated at the household level for total non-durable spending, expenditures on durable goods, as well as non-durable expenditure share equations. The imputed household spending is then used to simulate the baseline VAT system in EUROMOD, for which we report an incidence analysis. Finally, several arbitrary policy reforms implementing VAT rate uniformity are analyzed with respect to their distributional impact.
    Date: 2014–06–16
  2. By: Mason Gaffney (Department of Economics, University of California Riverside)
    Abstract: World lenders have dismissed warnings from credit rating firms and kept buying and holding U.S. Treasuries for security. The likely reason is that our tax system is stronger than Europe's. The major difference is that Europe has come to rely heavily on VATs, while the U.S. stands alone in not having any. VAT's broad tax base is not succeeding in maintaining revenues, even as tax rates climb. J.S. Mill faulted general sales taxes like VAT for taxing capital itself, not just its income, for turning over; Frank Ramsey and A.C. Pigou for ignoring different elasticities of supply and demand. Gaffney refutes the idea that such taxes foster capital formation. VAT arose in 1954 France, and metastasized quickly worldwide. It reversed two centuries of progress in tax systems and turned Europe back towards the practices of l'ancien régime before 1800. The next step is on how the U.S.A. came to adopt and develop tax systems more congenial to commerce and industry and high wages than did Europe. Credit is due to Turgot, and allied French économistes who bent the minds of our Founding Fathers. Credit is later due to leaders of The Progressive Movement who framed our early income-tax laws. Step 3 explains how Germany's Currency Reform under Erhard quickly raised Germany back from the dead, and it how it demonstrated a fundamental principle of how taxes affect incentives positively, the wealth effect. Then, the original French VAT grew as the unseen protegé of European unity, while the U.S.A. fostered VAT everywhere around the world except at home. Step 4 illustrates how Europe stagnated as VAT grew, and how banks and public exchequers grew mutually dependent, together building a house of cards based on future tax revenues – revenues that VAT cannot provide, even as it chokes off productive commerce and industry and employment. Step 5 explains the theory of the excess burdens of VAT taxation, and faults economists, both conventional and Austrian, for failing to expound and highlight these, and relate them to Europe's unstanchable flood of troubles. Step 6 traces the role of a host of economic scholars and statesmen in rationalizing, endorsing and promoting VAT, from Thomas Hobbes to the Republican Platform of 2012. Step 7 discusses the role of the cartel of international agencies and banks in promoting "harmony", in taxing, lending and collecting. It gives evidence that Europe has NOT reached the limit of its taxable capacity; rather, it needs a better tax system and philosophy, with higher rates on narrower and less elastic bases.
    Date: 2013–01
  3. By: Saiki Tsuchiya (Bank of Japan); Shinichi Nishioka (Bank of Japan)
    Abstract: This paper quantitatively analyzes how firms' default rates are affected by intangible assets, which play a crucial role in business management but are difficult to assess objectively. We use intangible assets such as firms' technological capability and the qualifications of senior management, for which numerical data from each firm are available. The results are as follows: (1) intangible assets have statistical explanatory power for firms' default rates in addition to financial data; (2) a model that incorporates intangible assets has greater accuracy in estimating default rates than one that incorporates only financial data, and the difference in the accuracy is statistically significant; and (3) the impact of changes in intangible assets on firms' default rates is comparable with that of changes in financial data. Based on our analysis, it may be effective to take into consideration intangible assets to enhance the accuracy in estimating firms' default rates. Therefore, in assessing firms' credit risk, it is important to enhance the information on intangible assets to objectively assess these assets.
    Keywords: Estimated default rates; Intangible assets; Logit model; Bootstrap method
    Date: 2014–02–07
  4. By: Keuschnigg, Christian; Loretz, Simon; Winner, Hannes
    Abstract: This survey summarizes the state and development of European tax policy, in particular discussing the harmonization progress in direct as well as indirect taxes. Based on an over-view over the theoretical and empirical literature on tax competition, we further ask whether increased tax coordination is necessary to prevent a race to the bottom. We show that theoretical predictions on the outcome of tax competition are ambiguous, and the empirical evidence in this regard is inconclusive as well. This, in turn, gives rise to an only limited scope of stronger tax harmonization.
    Keywords: Tax Competition, tax coordination, European economic integration
    JEL: H87 H77
    Date: 2014–08
  5. By: Avram, Silvia
    Abstract: Less visible than benefit expenditure, spending channelled through the tax system via tax concessions and advantages can amount to substantial amounts of foregone revenue. In this paper we use EUROMOD, a tax-benefit micro-simulation model covering all EU member states, to investigate the size and distributional effects of tax allowances and tax credits in 6 European countries. We also investigate in detail which types of policy instruments have the most potential to redistribute towards the bottom and which are likely to be mostly benefitting households at the top of the income distribution. We examine both categorical targeting (i.e. eligibility rules that depend on some individual or household general characteristics) and explicit income targeting .We find that with a few exceptions the impact of tax allowances and tax credits on inequality is small. Tax credits are generally more progressive than tax allowances. However, with the exception of refundable tax credits, the design of the allowances/credits appears to be less important than the characteristics of the population they are targeting and/or other features of the income tax system in determining the redistributive effect. Consequently, tax concessions appear ill-suited to target resources towards households in the bottom part of the income distribution.
    Date: 2014–07–04
  6. By: Matteo Morini (ENS Lyon, RHÔNE ALPES COMPLEX SYSTEMS INSTITUTE (IXXI), Lyon, France; Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy); Simone Pellegrino (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: Given a settled reduction in the present level of tax revenue, and by exploring a very large combinatorial space of tax structures, in this paper we employ a genetic algorithm in order to determine the optimal structure of a personal income tax that allows the maximization of the redistributive effect of the tax, while preventing all taxpayers being worse off than with the present tax structure. We take Italy as a case study.
    Keywords: Personal income taxation, Genetic algorithms, Micro-simulation models, Reynolds-Smolensky index, Tax reforms
    JEL: C63 C81 H23 H24
    Date: 2014–09
  7. By: Steve Gui-Diby (Macroeconomic Policy and Development Division, United Nations Economic and Social Commission for Asia and the Pacific)
    Abstract: Tax rates are key tools for mobilizing domestic resources and addressing specific market failures. Countries often offer tax concessions or reduce corporate tax rates in order to boost private investment or to direct investment to “desired areasâ€. Corporate tax rates, especially for foreign investors, have been reduced significantly in many Asia-Pacific economies during the last seven years. However, this policy has had limited success in the region in terms of foreign direct investment (FDI) inflows, but at the same time has deprived governments from valuable resources required to support inclusive and sustainable development especially when government budget is in distress. Estimated tax losses due to the reduction of corporate tax rates, as well as alternative options for attractive FDI, including regional tax agreement on avoidance of tax competition, are analyzed in this policy brief.
  8. By: World Bank
    Keywords: Law and Development - Tax Law Taxation and Subsidies Private Sector Development - Emerging Markets Finance and Financial Sector Development - Debt Markets Private Sector Development - E-Business Macroeconomics and Economic Growth
    Date: 2014–01
  9. By: João Pinto (Faculdade de Economia e Gestão - Universidade Católica Portuguesa, Porto); Luís K. Pacheco (Faculdade de Economia e Gestão - Universidade Católica Portuguesa, Porto)
    Abstract: A structured leasing is a new and highly flexible transaction that develops synergies between funding policy, risk management of the underlying assets, and tax benefits. It is used in particular transactions involving complex and large-scale assets, such as airplanes, ships, industrial plant and equipment, and large real estate projects. As in other tax-based techniques, the implementation of a structured leasing transaction, either a leveraged lease or a synthetic lease, is more significant when the value of the asset is large and allows for a potentially greater tax benefits’ appropriation. Structured leasing creates value by increasing liquidity and funding, reducing the funding costs, allowing sponsors to attain greater leverage and to increase tax shields, improving lessees’ risk management, and allowing lessees to maintain financial flexibility, by improving or maintaining financial ratios. Although all of the above-mentioned economic advantages, structured leasing also has problems. The most commonly referred problems of structured leases are complexity, offbalance sheet treatment, higher transaction costs, and wealth expropriation. Besides describing the economic motivations and problems of structured leasing, this paper provides details on the characteristics of structured leasing activity and reviews the most influential papers, summarizes their results, and associates them with the existing empirical evidence.
    Keywords: financing, leasing, structured leases, leveraged leases, synthetic leases
    JEL: G23 G24 G32
    Date: 2014–07
  10. By: Elvio Accinelli (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Edgar J. Sánchez Carrera (Universidad Autónoma de San Luis Potosí)
    Abstract: In this paper, we consider a society composed of citizens grouped in different economic strata based on income, who must pay taxes, but there are incentives to do so, and a set of public officials (auditors), whose function is to monitor compliance with the tax rules among citizens. We assume that corrupt auditors can accept bribes from evaders. We show that income inequality as a driver acts of corruption and tax evasion. Next we introduce an evolutionary model to analyze the progress or regression of evasion and corruption among public officials. We conclude with some observations on policies and incentives to combat these social ills.
    Keywords: corrupt behavior; taxes; evolutionary game.
    JEL: C72 C73 O11 O55 K42

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