nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2014‒12‒19
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Balance Sheet Repair and Corporate Investment in Japan By Joong Shik Kang
  2. Piecewise Linear Income Tax Reforms By Alan Krause
  3. Effects of taxation by economic functions on economic growth in the European Union By Szarowska, Irena
  4. Judicial Presence and Rent Extraction By Stephan Litschig; Yves Zamboni
  5. "As Rare as a Panda": How Facial Attractiveness, Gender, and Occupation Affect Interview Callbacks at Chinese Firms By Maurer-Fazio, Margaret; Lei, Lei
  6. Can formula apportionment really prevent multinational enterprises from profit shifting? The role of asset valuation, intragroup debt, and leases By Kiesewetter, Dirk; Steigenberger, Tobias; Stier, Matthias

  1. By: Joong Shik Kang
    Abstract: We trace Japanese firms’ behavior over the last decades using aggregate corporate balance sheet data. Financial health of Japanese corporate sector has improved and firms paid back significant amount of debt and rebuilt their liquidity buffers. They also expanded abroad while the pace of corporate investment moderated. Regarding the latter, model estimates on aggregate corporate investment over the post bubble period show that expectation about future profitability, in particular medium-term demand outlook, has been the major driver, implying that a successful implementation of structural reforms could have positive impact even in the near term by improving the medium-term demand outlook.
    Keywords: Corporate sector;Japan;Balance sheets;Corporate investment;Econometric models;Japan, Investment, Capital, Growth
    Date: 2014–08–04
  2. By: Alan Krause
    Abstract: This paper addresses questions of the following nature: under what conditions does a welfare-improving reform of the existing piecewise linear income tax schedule necessitate a change in a particular agent type's marginal tax rate? Our analysis therefore addresses the sorts of questions typically debated by policy-makers, using a model of income taxation that resembles income tax systems used in practice. A locally optimal tax schedule is a special case of our tax reform analysis---the current piecewise linear income tax schedule is locally optimal if there does not exist an equilibrium-preserving and welfare-improving reform. We show that local optima involve progressive taxation, in that marginal tax rates are increasing in income. An extension of the model to include linear commodity taxation is also considered. In this case, local optima comprise positive commodity taxation and progressive income taxation.
    Keywords: tax reform; piecewise linear income taxation.
    JEL: H21 H24
    Date: 2014–11
  3. By: Szarowska, Irena
    Abstract: The complexity of today’s global economic environment increases importance of identifying and understanding the key factors affecting economic growth. This paper deals with effect of changes in tax burden on economic growth and provides direct empirical evidence in the European Union as financial and economic crisis has impacted also on tax systems. It is used the Eurostat´s definition to categorize tax burden by economic functions and implicit tax rates of consumption, labour and capital are investigated. The analysis is based on annual panel data of 24 EU member states in a period 1995-2010. Panel regression and Pairwise Granger Causality Tests are used as the main method of research. Results confirm, in line with the theory, statistically significant positive effect of consumption taxes and negative effect of labour taxes on GDP growth. In short-term, there is two-way causality between change of implicit tax rate of consumption and GDP growth and one-way causality between GDP growth and change of implicit tax rate of capital and implicit tax rate of labour.
    Keywords: tax burden, implicit tax rates, economic functions, economic growth, competitiveness
    JEL: E62 H21 H30
    Date: 2013
  4. By: Stephan Litschig; Yves Zamboni
    Abstract: We estimate the effect of state judiciary presence on rent extraction in Brazilian local governments. We measure rents as irregularities related to waste or corruption uncovered by auditors. Our unique dataset at the level of individual inspections allows us to separately examine extensive and intensive margins of rent extraction. The identification strategy is based on an institutional rule of state judiciary branches according to which prosecutors and judges tend to be assigned to the most populous among contiguous counties forming a judiciary district. Our research design exploits this rule by comparing counties that are largest in their district to counties with identical population size from other districts in the same state, where they are not the most populous. IV estimates suggest that state judiciary presence reduces the share of inspections with irregularities related to waste or corruption by about 10 percent or 0.3 standard deviations.
    Keywords: institutions, corruption, rents, local governments
    JEL: D02 D72 D78 H41 H83
    Date: 2014–11
  5. By: Maurer-Fazio, Margaret (Bates College); Lei, Lei (Liberty Mutual Insurance)
    Abstract: This study explores how both gender and facial attractiveness affect job candidates' chances of obtaining interviews in China's dynamic Internet job board labor market. It examines how discrimination based on these attributes varies over occupation, location, and firms' ownership type and size. We employ a resume (correspondence) audit methodology. We establish the facial attractiveness of candidate photos via an online survey. 24,192 applications are submitted to 12,096 job postings across four occupations in 6 Chinese cities. We find sizable differences in the interview callback rates of attractive and unattractive job candidates. Job candidates with unattractive faces need to put in 33% more applications than their attractive counterparts to obtain the same number of interview callbacks. Women are preferred to men in three of our four occupations. Women on average need to put in only 91% as many applications as men to obtain the same number of interview callbacks.
    Keywords: beauty, gender, field experiments, discrimination, Chinese firms, hiring, facial attractiveness, internet job boards, resume correspondence audit study
    JEL: C93 J71 J23 O53
    Date: 2014–10
  6. By: Kiesewetter, Dirk; Steigenberger, Tobias; Stier, Matthias
    Abstract: The European Commission has been supporting a transition from a system of separate accounting to a system of formula apportionment. In 2011, it presented a proposal for a council directive on a Common Consolidated Corporate Tax Base (CCCTB). Formula apportionment is often considered more resistant to profit shifting and assumed to reduce compliance costs. We use a dynamic model of tax accounting based on neoclassical investment theory and effective tax rates to determine whether, and to what extent, formula apportionment mitigates the efficiency of typical profit-shifting measures. We focus on the roles of transfer pricing and intragroup debt financing (through loans and leases) under both separate accounting and formula apportionment. Our results show that instead of eliminating tax planning strategies, the proposed system will simply induce a shift from manipulating reported profits to influencing the apportionment key. Inside the European Union, the CCCTB may be able to render thin capitalisation rules and transfer pricing documentation redundant. However, formula apportionment invites new forms of tax planning involving manipulating the book value of assets rather than profit shifting.
    Keywords: Effective Tax Rate,CCCTB,Formula Apportionment,Tax Planning,Profit Shifting,Debt Financing,Leasing
    JEL: H20 F21 D21
    Date: 2014

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