nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2014‒11‒28
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The three hurdles of tax planning: How business context, aims of tax planning, and tax manager power affect tax By Feller, Anna; Schanz, Deborah
  2. The Tax-Rate Elasticity of Local Business Profits By Frank M. Fossen; Viktor Steiner
  3. Defining Europe's Capital Markets Union By Nicolas Véron
  4. How Does Government Borrowing Affect Corporate Financing and Investment? By John Graham; Mark T. Leary; Michael R. Roberts
  5. The Nature and Causes of Profits: The Classical Approach from Smith to Marx By Sean Kimpton
  6. Micro and macro data: a comparison of the Household Finance and Consumption Survey with financial accounts in Austria By Andreasch, Michael; Lindner, Peter
  7. Finance-dominated capitalism in Germany: Deep recession and quick recovery By Detzer, Daniel; Hein, Eckhard
  8. Regulating Capital Flows at Both Ends: Does it Work? By Atish R. Ghosh; Mahvash Saeed Qureshi; Naotaka Sugawara

  1. By: Feller, Anna; Schanz, Deborah
    Abstract: The question of why some companies pay more taxes than others is a widely investigated topic of interest. One of the famous suspect explanations is a phenomenon called tax avoidance. We develop a holistic theoretical concept of influences on corporate tax planning through a series of 19 in-depth German tax expert interviews. Our findings show that three distinct hurdles in the tax planning process can explain different levels of tax expense across companies. Those three hurdles are which tax planning methods are. available (defined by business context), desirable (given via aims of tax planning), and implementable (determined by tax manager power). A large part of previous research has estimated the influence of firm characteristics, which we define as part of the business context, on the tax expense, while the other influences that we identify have largely been left "out of the equation". In order to apply and operationalize the identified three-hurdle concept, we construct five short, real-world company case studies. In these case studies, we show how variation in two key constructs across companies leads to different levels of tax expense. First, companies vary widely in the aggressiveness of their aims of tax planning. Second, tax managers can assume very different levels of power in their organization, determining the ability to implement tax planning methods. In conclusion, we provide generalizable insights into the tax planning process of companies which help to explain the observed variation in tax expenses across firms.
    Keywords: tax planning,tax avoidance,manager power,qualitative research
    JEL: D22 H25 M12 M41
    Date: 2014
  2. By: Frank M. Fossen; Viktor Steiner
    Abstract: Local business profits respond to local business tax (LBT) rates that vary across municipalities. We estimate that a one percent increase in the LBT rate decreases the LBT base by 0.45 percent, based on the universe of German LBT return files, which include corporations and unincorporated businesses. However, the fiscal equalization scheme largely compensates municipalities for the loss in the LBT base when they increase the LBT rate. Our estimates suggest that using taxrevenue data instead of tax return data, as commonly done in the literature, results in a significant bias of the elasticity away from zero.
    Keywords: Local business tax, corporate tax, tax responsiveness, tax-rate elasticity
    JEL: H25 H71
    Date: 2014
  3. By: Nicolas Véron
    Abstract: The new European Commission has signalled that it will work to create a â??capital markets unionâ??. This is understood as an agenda to expand the non-bank part of Europeâ??s financial system, which is currently underdeveloped. The aim in the short term is to unlock credit provision as banks are deleveraging, and in the longer term, to favour a more diverse, competitive and resilient financial system. Direct regulation of individual non-bank market segments (such as securitisation, private placements or private equity) might be useful at the margin, but will not per se lead to significant capital markets development or the rebalancing of Europeâ??s financial system away from the current dominance by banks. To reach these goals, the capital markets union agenda must be broadened to address the framework conditions for the development of individual market segments. Six possible areas for policy initiative are, in increasing order of potential impact and political difficulty: regulation of securities and specific forms of intermediation;prudential regulation, especially of insurance companies and pension funds;regulation of accounting, auditing and financial transparency requirements that apply to companies that seek external finance;a supervisory framework for financial infrastructure firms, such as central counterparties, that supports market integration;partial harmonisation and improvement of insolvency and corporate restructuring frameworks;andpartial harmonisation or convergence of tax policies that specifically affect financial investment.
    Date: 2014–11
  4. By: John Graham; Mark T. Leary; Michael R. Roberts
    Abstract: Using a novel dataset of accounting and market information that spans most publicly traded nonfinancial firms over the last century, we show that U.S. federal government debt issuance significantly affects corporate financial policies and balance sheets through its impact on investors' portfolio allocations and the relative pricing of different assets. Government debt is strongly negatively correlated with corporate debt and investment, but strongly positively correlated with corporate liquidity. These relations are more pronounced in larger, less risky firms whose debt is a closer substitute for Treasuries. Indeed, we find a strong negative relation between the BAA-AAA yield spread and government debt, highlighting the greater sensitivity of more highly rated credit to variation in the supply of Treasuries. The channel through which this effect operates is investors' portfolio decisions: domestic intermediaries actively substitute between lending to the federal government and the nonfinancial corporate sector. The relations between government debt and corporate policies, as well as the substitution between government and corporate debt by intermediaries, are stronger after 1970 when foreign demand increased competition for Treasury securities. In concert, our results suggest that large, financially healthy corporations act as liquidity providers by supplying relatively safe securities to investors when alternatives are in short supply, and that this financial strategy influences firms' capital structures and investment policies.
    JEL: E22 E44 G20 G31 G32
    Date: 2014–10
  5. By: Sean Kimpton (Department of Economics, Faculty of Business and Law, Auckland University of Technology)
    Abstract: The Global Financial Crises has motivated some to rethink the dominance of global capitalism. This has revived an interest in Marxist doctrine and in particular its examination of the notion of exploitation. Marx’s theory of value is central to his examination of exploitation. This paper will show that both these posits of Marx are in error. Further, it will show that Marx draws heavily on Smith’s idea of the primacy of wages. However, this paper will demonstrate that profit, and not wages, are the original source of income. This paper reaffirms the importance of profits and the ability of entrepreneurs and capitalists to pursue them.
    Keywords: Adam Smith; Karl Marx; Profit; Exploitation; Labour Theory of Value; Classical Economics
    Date: 2014–10
  6. By: Andreasch, Michael; Lindner, Peter
    Abstract: This paper compares the survey results on savings deposits and estimates on total financial assets from the Household Finance and Consumption Survey (HFCS) in Austria with administrative records from the national accounts for the household sector. The micro data newly generated through the HFCS and the detailed (internally available) breakdowns of savings deposits in the existing macro data (Financial Accounts) lend themselves to a more in-depth analysis of the similarities and differences in these two sources than what has been done in the literature so far. Cross-checking the data shows that the HFCS-based aggregate estimates differ from the financial accounts data, which is line with evidence from the literature, but additionally the paper adds to the literature that the underlying patterns have been captured adequately by the survey at the micro level. Moreover, a simulation based on the HFCS data serves to demonstrate the effect that the inclusion of savings deposits in the most affluent tail of the distribution has on common statistics. Undercoverage above all of the upper deposit ranges suggests an underestimation or bias in the statistics. This underestimation, however, can be shown to be relatively minor, in particular in the case of robust statistical measures such as the median or percentile ratios. JEL Classification: C80, D30, D31, E01, E21
    Keywords: financial accounts, household finance and consumption survey
    Date: 2014–05
  7. By: Detzer, Daniel; Hein, Eckhard
    Abstract: Germany's recent export successes and the fast recovery from the 2007 -2009 crisis made it Europe's "economic superstar" in public opinion. This paper interprets the German performance against the background of financialisation. After an examination of the pre-crisis demand and growth regime, the focus is on how financialisation has contributed to the German 'export-led mercantilist' regime. The paper focuses subsequently on the determinants of the German current account balance, to then interpret the development of Germany during the financial and economic crisis and the causes for the quick recovery in light of the previous analysis.
    Keywords: current account imbalances,financialisation,financial and economic crisis,Germany,trade balance
    JEL: E25 E61 E63 E64 E65 F40 F43
    Date: 2014
  8. By: Atish R. Ghosh; Mahvash Saeed Qureshi; Naotaka Sugawara
    Abstract: This paper examines whether cross-border capital flows can be regulated by imposing capital account restrictions (CARs) in both source and recipient countries, as was originally advocated by John Maynard Keynes and Harry Dexter White. To this end, we use data on bilateral cross-border bank flows from 31 source to 76 recipient (advanced and emerging market) countries over 1995–2012, and combine this information with a new and comprehensive dataset on various outflow and inflow related capital controls and prudential measures in these countries. Our findings suggest that CARs at either end can significantly influence the volume of cross-border bank flows, with restrictions at both ends associated with a larger reduction in flows. We also find evidence of cross-border spillovers whereby inflow restrictions imposed by countries are associated with larger flows to other countries. These findings suggest a useful scope for policy coordination between source and recipient countries, as well as among recipient countries, to better manage potentially disruptive flows.
    Keywords: Capital flows;Capital account;Cross-border banking;Spillovers;Capital inflows;Capital controls;cross-boder bank flows, capital controls, prudential measures
    Date: 2014–10–17

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