nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2015‒01‒03
twelve papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Implementation of Treasury Single Account and Strengthening of Cash Management in Vietnam By World Bank
  2. Effective Corporate Taxation, Tax Incidence and Tax Reforms: Evidence from OECD Countries By Barrios, Salvador; Nicodème, Gaëtan; Sanchez Fuentes, Antonio Jesus
  3. Misreporting in the Value-Added Tax and the Optimal Enforcement By Hoseini, M.
  4. Tax compliance costs: A review of cost burdens and cost structures By Eichfelder, Sebastian; Vaillancourt, François
  5. Credit Booms, Banking Crises, and the Current Account By Scott Davis; Adrienne Mack; Wesley Phoa; Anne Vandenabeele
  6. Taxes, Earnings Payout, and Payout Channel Choice By Geiler, P.H.M.; Renneboog, L.D.R.
  7. Taxes in Cities By Brülhart, Marius; Bucovetsky, Sam; Schmidheiny, Kurt
  8. How has FDI influenced Current Account Balance In India? Time Series Results in presence of Endogenous Structural Breaks By Jaydeep Mukherjee; Debashis Chakraborty; Tanaya Sinha
  9. Tax Policy Endogeneity: Evidence from R&D Tax Credits By Chang, Andrew C.
  10. Do financial advisors provide tangible benefits for investors? Evidence from tax-motivated mutual fund flows By Cici, Gjergji; Kempf, Alexander; Sorhage, Christoph
  11. Self-Regulatory Organizations Under the Shadow Of Governmental Oversight: An Experimental Investigation By Silvester Van Koten; Andreas Ortmann
  12. Manager of financial globalization? The European Union in global anti-money laundering and international accounting standard setting By Hilgers, Sven

  1. By: World Bank
    Keywords: Finance and Financial Sector Development - Access to Finance Public Sector Expenditure Policy Finance and Financial Sector Development - Debt Markets Public Sector Economics Banks and Banking Reform Public Sector Development
    Date: 2014–01
  2. By: Barrios, Salvador; Nicodème, Gaëtan; Sanchez Fuentes, Antonio Jesus
    Abstract: The present study provides estimates of the Effective Marginal Tax Rates (EMTRs) for a sample of 17 OECD countries and 11 manufacturing sectors in a single framework encompassing capital, labour and energy taxes. Our cross-country/cross-sector approach allows us comparing the incentives provided by the tax systems and gauging the effects of tax changes taking explicitly into account the possible substitution between factors as well as their tax incidence. Our results suggest that the OECD tax systems provide different incentives for manufacturing activity across countries and that tax systems are relatively neutral with respect to the sectoral composition of manufacturing activities. The impact of potential tax increases on firms´ activity is found to be most attenuated when shifted towards consumers and/or employees rather than energy consumption and/or capital investors. These results are robust to alternative hypotheses regarding the tax incidence parameters, elasticity of substitution between factors and mark-up on final prices. In addition, policy strategies favouring tax increases on energy consumption and lowering taxes on labour can substantially reduce the EMTRs and thus yield substantial efficiency gains for firms. These reforms should in some instances be ambitious enough to produce desired effects on firms’ EMTRs, however.
    Keywords: effective taxation; tax incidence; taxation
    JEL: H20 H22 H24 H25
    Date: 2014–10
  3. By: Hoseini, M. (Tilburg University, Center For Economic Research)
    Abstract: A common fraud by registered traders in the value-added tax system is under-reporting sales and over-reporting purchases. This paper models this problem by linking the level of misreporting to the risk-aversion of taxpayers and the level of transactions with final consumers. In addition, it analyses the enforcement consequences of the new developments in information reporting and electronic invoicing, which enable the tax authority to randomly cross-check the invoices. The results highlight the importance of taxpayer’s subjective beliefs in shaping audit policy of the tax authority. The optimal audit rate for risk-neutral firms is an increasing function of transaction with final consumers, but this relationship may turn to be negative for risk-averse taxpayers. Moreover, the optimal level of invoice cross-checking on transactions of each commodity is positively associated with the number of trading firms.
    Keywords: value-added tax; tax evasion; information reporting; predictive analytics
    JEL: H26
    Date: 2014
  4. By: Eichfelder, Sebastian; Vaillancourt, François
    Abstract: Our paper provides a comprehensive report of empirical research on tax compliance costs. Compared to previous reviews, our focus is on average costs for sub-groups (individual taxpayers, small businesses, large businesses) and the composition of the cost burden with regards to different cost components (in-house time effort, external adviser costs, other monetary expenses), different taxes (e.g. income tax, value added tax) and different activities like tax accounting and tax planning. In addition, we give a short review of the most important compliance cost drivers and discuss the underlying causes of tax complexity and compliance costs.
    Keywords: tax compliance costs,cost structures,cost burdens,cost drivers
    JEL: H21 H24 H25
    Date: 2014
  5. By: Scott Davis (Hong Kong Institute for Monetary Research and Federal Reserve Bank of Dallas); Adrienne Mack (Federal Reserve Bank of Dallas); Wesley Phoa (The Capital Group Companies); Anne Vandenabeele (The Capital Group Companies)
    Abstract: A number of papers have shown that rapid growth in private sector credit is a strong predictor of a banking crisis. This paper will ask if credit growth is itself the cause of a crisis, or is it the combination of credit growth and external deficits? This paper estimates a probabilistic model to find the marginal effect of private sector credit growth on the probability of a banking crisis. The model contains an interaction term between credit growth and the level of the current account, so the marginal effect of private sector credit growth may itself be a function of the level of the current account. We find that the marginal effect of rising private sector debt levels depends on an economy's external position. When the current account is in balance, the marginal effect of an increase in debt is rather small. However, when the economy is running a sizable current account deficit, implying that any increase in the debt ratio is financed through foreign borrowing, this marginal effect is large.
    Keywords: Banking Crises, Credit Booms, Current Account
    JEL: E51 F32 F40
    Date: 2014–11
  6. By: Geiler, P.H.M. (Tilburg University, Center For Economic Research); Renneboog, L.D.R. (Tilburg University, Center For Economic Research)
    Abstract: We study the tax regulations in relation to dividends and capital gains over the last two decades for the UK in order to determine whether changes in tax regimes affect corporate payout policy (dividends, share repurchases, or a combination). While we can identify investors’ tax-driven preferences for a specific payout channel, we find no evidence of tax-induced clienteles. Firms do indeed not cater to the tax preferences of their shareholders (including individuals, pension funds, corporations). Other factors, such as equity-based compensation received by the CEO and investor sentiment in the form of optimism reduce the dividend payout and increase the use of share repurchases.
    Keywords: payout policy; dividends; share repurchases; taxation; regulation
    JEL: G28 G30 G35 G38
    Date: 2014
  7. By: Brülhart, Marius; Bucovetsky, Sam; Schmidheiny, Kurt
    Abstract: Most cities enjoy some autonomy over how they tax their residents, and that autonomy is typically exercised by multiple municipal governments within a given city. In this chapter, we document patterns of city-level taxation across countries, and we review the literature on a number of salient features affecting local tax setting in an urban context. Urban local governments on average raise some ten percent of total tax revenue in OECD countries and around half that share in non-OECD countries. We show that most cities are highly fragmented: urban areas with more than 500,000 inhabitants are divided into74 local jurisdictions on average. The vast majority of these cities are characterized by a central municipality that strongly dominates the remaining jurisdictions in terms of population. These empirical regularities imply that an analysis of urban taxation needs to take account of three particular features: interdependence among tax-setting authorities(horizontally and vertically), jurisdictional size asymmetries, and the potential for agglomeration economies. We survey the relevant theoretical and empirical literatures, focusing in particular on models of asymmetric tax competition, of taxation and income sorting and of taxation in the presence of agglomeration rents.
    Keywords: agglomeration; cities; fiscal federalism; local taxation; population sorting; tax competition
    JEL: H71 H73 R28 R51
    Date: 2014–08
  8. By: Jaydeep Mukherjee (Indian Institute of Foreign Trade, New Delhi, India); Debashis Chakraborty (Indian Institute of Foreign Trade, New Delhi, India); Tanaya Sinha (Lecturer, Amity University)
    Abstract: In 1991 as par the recommendations of the IMF, India followed a structural adjustment programme. The new economic philosophy shifted towards export-oriented growth model, where augmenting competition in the domestic market through reforms in licensing provisions and adoption of better technological capabilities through FDI collaborations have played an extremely important role. Over the last decade, the high economic growth in India resulting from the reforms has motivated massive FDI inflow in the country. The continuous inflow has caused India’s share in global FDI inward stock to increase from 0.08 percent in 1990 to 0.22 percent and 1.03 percent in 2000 and 2010 respectively. However, the improved FDI scenario in India has simultaneously witnessed a decline in the current account balance (CAB) of the country. In this background, the current paper attempts to explore the underlying long term co-integrated relationship between FDI inflow in India and CAB by analyzing quarterly data over 1990-91:Q1 to 2010-11:Q4. Our result indicates that there exists a unique long-run relationship among FDI and CAB with two endogenous structural breaks. The analysis also reveals a unidirectional causality from India’s FDI to CAB at 5 percent level. The findings imply that although FDI may seem beneficial as a source of financing for the current account deficit, it may eventually lead to balance of payments problems due to adverse effects on current account. In this respect, even the role of FDI on economic growth can be questioned. Secondly, the huge outflow of foreign exchange from the country in recent years in the form of profit remittances raises the concerns over the optimality of allowing hundred percent profit repatriation.
    Keywords: International Capital Movements, Foreign Exchange, Current Account Adjustment
    JEL: F21 F31 F32
    Date: 2013–01
  9. By: Chang, Andrew C. (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: Because policymakers may consider the state of the economy when setting taxes, endogeneity bias can arise in regression models that estimate relationships between economic variables and taxes. This paper quantifies the policy endogeneity bias and estimates the impact of R&D tax incentives on R&D expenditures at the U.S. state level. Identifying tax variation comes from changes in federal corporate tax laws that heterogeneously impact state-level R&D tax incentives due to the simultaneity of state and federal corporate taxes. With this exogenous variation, my preferred estimates indicate a 1 percent increase in R&D tax incentives leads to a 2.8-3.8 percent increase in R&D. Alternatively, estimates that ignore endogenously determined policies indicate that a 1 percent increase in R&D tax incentives leads to a 0.4-0.7 percent increase in R&D. These results are consistent with tax policies that are implemented before an economic downturn.
    Keywords: Corporate tax; fiscal policy; R&D price elasticity; tax credits; policy endogeneity
    JEL: H20 H25 H32 H71 K34 O38
    Date: 2014–11–21
  10. By: Cici, Gjergji; Kempf, Alexander; Sorhage, Christoph
    Abstract: Rationality suggests that advice-seeking investors receive benefits from financial advice that are comparable in value to the fees paid for such advice. However, empirical evidence documenting these benefits for U.S. investors has so far been lacking. We document that U.S. mutual fund investors indeed receive one of the many previously hypothesized benefits in the form of valuable tax-management advice that helps avoid taxable fund distributions. This benefit is economically significant and becomes even more valuable when investors face large and hard-to-predict tax liabilities. Additional evidence suggests that financial advice helps with other aspects of tax management such as tax-loss selling.
    Keywords: Mutual funds,Taxable fund distributions,Financial advisors
    JEL: D14 G11 G24 H24
    Date: 2014
  11. By: Silvester Van Koten; Andreas Ortmann
    Abstract: Self-regulatory organizations (SROs) can be found in education, healthcare, and other not-for-profit sectors as well as in the accounting, financial, and legal professions. DeMarzo et al. (2005) show theoretically that SROs can create monopoly market power for their affiliated agents, but that governmental oversight, even if less efficient than oversight by the SRO, can largely offset the market power. We provide an experimental test of this conjecture. For carefully rationalized parameterizations and implementation details, we find that the predictions of DeMarzo et al. (2005) are borne out.
    Keywords: experimental economics; self-regulatory organizations, governmental oversight;
    JEL: C90 L44 G18 G28
    Date: 2014–11
  12. By: Hilgers, Sven
    Abstract: How does the European Union (EU) perform in international financial regulation? According to various scholars the global financial architecture has been shaped by the USA and the EU. But whereas the USA is without doubt the dominant actor or even described as hegemon in writing the rules for the global political economy and global financial markets, the EU seems to be a special kind of actor. The European Union is not only one of the biggest single financial markets in the world but also has become one of the largest financial jurisdictions in the last decade. Despite this huge market size the EU's representation in institutions of the global financial regulation is quite low. Hence the direct EU impact on global financial regulation is often seen as weak or the EU is perceived rather as a forum than an actor. Given the debate on the external actorness of the EU global financial regulation is an interesting case for evaluating the EU's actorness in fields, where the EU has competences like anti-money laundering and setting accounting standards. In the paper I applied the managed globalization doctrine in order to analyze the EU's performance in those fields. The evidence illustrates that even in the fields, where the EU have regulatory competencies, the European Union is not able or willing to shape the global regulation.
    Abstract: Welchen Einfluss hat die Europäische Union (EU) in internationaler Finanzmarktregulierung? Zahlreiche Wissenschaftler gehen davon aus, dass die globale Finanzarchitektur maßgeblich von den USA und der EU geprägt worden ist. Während aber die USA zweifelsohne der zentrale Akteur, vielleicht sogar ein Hegemon in der globalen Finanzmarktregierung ist, scheint die EU ein spezieller Akteur zu sein. Die EU besitzt nicht nur den größten Finanzmarkt der Welt, sondern ist auch zu einem der größten einheitlich geregelten Märkte der Welt geworden. Doch trotz dieser Marktgröße ist die EU in den zentralen Institutionen zur Regulierung von Finanzmärkten nicht vertreten. Gerade auch deswegen wird der direkte Einfluss der EU auch meistens als schwach eingestuft. Vor dem Hintergrund der laufenden Debatte über die Akteursqualität der EU ist die globale Finanzmarktregulierung ein interessanter Fall, um die Akteursqualität der EU in Feldern zu untersuchen, in denen sie Regulierungskompetenz hat. In den Bereichen Geldwäschebekämpfung und Bilanzierungsstandards hat die EU Kompetenzen. Daher wird in dem vorliegenden Papier anhand der "Managed Globalization" Doktrin untersucht, inwiefern die EU in der Lage ist als eigenständiger Akteur zu agieren. Die Ergebnisse der Studie geben ein ernüchterndes Bild wieder. In keinem der beiden Fälle ist die EU in der Lage oder Willens, die Regulierung wirksam zu beeinflussen.
    Date: 2014

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