nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2015‒07‒04
four papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Experiences with cash-flow taxation and prospects. Final report By Ernst & Young
  2. The Funding of State and Local Pensions: 2014-2018 By Alicia H. Munnell; Jean-Pierre Aubry
  3. Patent Boxes Design, Patents Location and Local R&D By Annette Alstadsæter; Salvador Barrios; Gaëtan Nicodème; Agnieszka Maria Skonieczna; Antonio Vezzani
  4. The Accumulation of Human and Nonhuman Capital, Revisited By Barbara M. Fraumeni; Michael S. Christian; Jon D. Samuels

  1. By: Ernst & Young
    Abstract: A study on Cash-flow taxation in EU- and OECD-Member States, to gather information on the design and the impact of the implementation of such a system in practice. This information will be used to evaluate the ability of the system to address issues like the debt-equity bias, the tax neutrality in respect of locational choices and compliance costs. Out of 47 examined States, this report identifies three jurisdictions where a (close to) full-fledged CFT was implemented, namely Mexico, Estonia and Macedonia. The other dentified CFTs relate to three broad categories: small and medium enterprises, sector specific taxes and gross receipt taxes.
    Keywords: European Union, cash-flow taxation, debt-equity bias, compliance costs
    Date: 2015–06
  2. By: Alicia H. Munnell; Jean-Pierre Aubry
    Abstract: The year 2014 was always going to be a pivotal one for the funded status of public pension plans because, under the old GASB 25 accounting standards, the disastrous stock market performance of 2009 rotates out of the smoothing calculations for the majority of plans that use a five-year averaging period. But 2014 also became pivotal because it was the first year that plan sponsors reported under GASB’s new accounting standards for their financial disclosures. The new GASB 67 standards involve two major changes. First, assets are reported at market value rather than actuarially smoothed. Second, in cases when assets are projected to fall short of future benefits, liabilities are valued using a “blended” discount rate. Although GASB standards apply to financial reporting only, when GASB 25 was in effect, most plans also used the same standards for funding purposes. Under GASB 67, however, plans are now using separate standards for reporting and funding. For reporting in their financial documents, all plans in our sample that have released 2014 data adopted the market valuation of assets as required by GASB 67, but only seven plans determined it necessary to use a significantly lower blended discount rate. For funding purposes (i.e. in plans’ actuarial valuations), they maintained the traditional approach used under GASB 25 of using smoothed assets and expected long-run returns for discounting. This brief focuses on the data used in plans’ actuarial valuations because they provide the basis for historical comparisons and for funding decisions. The discussion is organized as follows. The first section reports that the ratio of assets to liabilities for the 150 plans in the Public Plans Database increased from 72 percent in 2013 to 74 percent in 2014. The second section shows that the required contribution increased from 17.8 percent to 18.6 percent of payrolls, while the percentage of required contributions paid increased from 82 percent to 88 percent. The third section revalues liabilities and recalculates funded ratios using the riskless rate, as advocated by most economists for reporting – as opposed to funding – purposes. The fourth section projects funded ratios for our sample plans for 2015-18 under two economic scenarios. The fifth section briefly describes the information reported in the financial statements under the new GASB standards. The final section concludes that, if plans achieve their assumed returns, the public pension landscape should continue to improve over the next few years.
    Date: 2015–06
  3. By: Annette Alstadsæter (University of Oslo); Salvador Barrios (European Commission – Joint Research Center); Gaëtan Nicodème (European Commission); Agnieszka Maria Skonieczna (European Commission); Antonio Vezzani (European Commission – Joint Research Center)
    Abstract: Patent boxes have been heavily debated for their role in corporate tax competition.This paper uses firm-level data for the period 2000-2011 for the top 2,000 corporate R&D investors worldwide to consider the determinants of patent registration across a large sample of countries. Importantly, we disentangle the effects of corporate income taxation from the tax advantage of patent boxes. We also exploit a new and original dataset on patent box features such as the conditionality on performing research in the country and their scope. We find that patent boxes have a strong effect on attracting patents mostly due to their favourable tax treatment, especially so for high quality patents. Patent boxes with a large scope in terms of tax base definition have also stronger effects on the location of patents. The size of the tax advantage offered through patent box regimes are found to deter local innovative activities while R&D development conditions tend to attenuate this adverse effect. Our simulations show that on average countries imposing such development conditions tend to grant a tax advantage which is slightly larger than optimal from a local R&D impact perspective.
    Keywords: Corporate taxation, patent boxes, location, patents, R&D, nexus approach
    JEL: F21 F23 H25 H73 O31 O34
    Date: 2015–06
  4. By: Barbara M. Fraumeni; Michael S. Christian; Jon D. Samuels
    Abstract: In the 25 years since Jorgenson and Fraumeni (1989) published their first article on human capital, the U.S. National Income and Product Accounts (NIPA) and the SNA have changed significantly. The contribution of this paper is two-fold: Creation of a contemporary set of accounts which integrate human capital measures into the latest comprehensive revision of the U.S. national income accounts and an analysis of trends in human capital and national income account aggregates over the post-war period. The paper is a national income accounting paper with production and factor outlay, income, receipt and expenditure, capital accumulation , and wealth accounts. All of these accounts are tied to the NIPA accounts, and supplemented with human capital estimates. A key feature of the human capital accounts is presentation of human capital estimates in current and constant prices. The time period covered is 1949-84 and 1998-2009. We update the human capital national income accounts and examine trends in the aggregate time series. The results in the original Jorgenson and Fraumeni paper are for 1982 and the aggregate time series are from 1949-1984. Subsequent research by Christian (2012) developed modified Jorgenson-Fraumeni (J-F) human capital estimates from 1998 through 2009. Unfortunately there is a gap in coverage. Nonetheless, a comparison of the aggregates and their trends between the earlier and later period will be informative. The accounting tables in this new paper are for 2009, the latest base year for the NIPA accounts.
    JEL: D24 E01 E24
    Date: 2015–06

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