nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2015‒10‒25
eleven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Capital Account Liberalization and Management By Ocampo Jos. Antonio
  2. Global standards for liquidity regulation By Liebmann, Eva; Peek, Joe
  3. Capital flows and the current account: Taking financing (more) seriously By Claudio Borio; Piti Disyatat
  4. Optimal inflation with corporate taxation and financial constraints By Daria Finocchiaro; Giovanni Lombardo; Caterina Mendicino; Philippe Weil
  5. On Redistributive Taxation under the Threat of High-Skill Emigration By Alan Krause
  6. MSME taxation in transition economies : country experience on the costs and benefits of introducing special tax regimes By Engelschalk,Michael; Loeprick,Jan
  7. State and Local Sales Taxes and Business Activity in the United States By Saxon, Nicholas; Tosun, Mehmet S.; Yang, Jingjing
  8. A Positive Theory of Tax Reform By Ethan Ilzetzki
  9. Patents as Quality Signals? The Implications for Financing Constraints on R&D By Bronwyn Hall
  10. How Firms Export: Processing vs. Ordinary Trade With Financial Frictions By Kalina Manova; Zhihong Yu
  11. Que « produit » l’entreprise d’économie sociale ? By Sybille MERTENS; Michel MAREE

  1. By: Ocampo Jos. Antonio
    Abstract: This paper reviews the history and controversies associated with capital account management. It first looks at the transition from the acceptance at the Bretton Woods conference of capital account regulations as a normal policy instrument to the liberaliz
    Keywords: Accounting, Capital, Financial institutions, International
    Date: 2015
  2. By: Liebmann, Eva (Austrian Federal Ministry of Finance); Peek, Joe (Federal Reserve Bank of Boston)
    Abstract: Liquidity risk has received increased attention recently, especially in light of the 2007 - 2009 financial crisis, when banks' extensive reliance on short-term funding, maturity mismatches between assets and liabilities, and insufficient liquidity buffers made them quite susceptible to liquidity risk. To mitigate such risk, the Basel Committee on Banking Supervision (BCBS) introduced an improved global capital framework and new global liquidity standards for banks in December 2010 in the form of the new Basel Accord (Basel III). This brief offers insights from the crisis experience, identifies the problems that the new liquidity regulation aims to address, and summarizes underlying differences between the United States and Europe that may affect the ability to design and implement consistent global standards.
    JEL: F33 G01 G28
    Date: 2015–07–01
  3. By: Claudio Borio; Piti Disyatat
    Abstract: This paper questions the appropriateness of popular analytical frameworks that focus on current accounts or net capital flows as a basis for assessing the pattern of cross-border capital flows, the degree of financial integration and the vulnerability of countries to financial crises. In the process, it revisits the Lucas paradox, the Feldstein-Horioka puzzle and the notion of sudden stops. It argues that, in a world of huge and free capital flows, the centrality of current accounts in international finance, and hence in academic and policy debates, should be reconsidered.
    Keywords: capital flows, current account, global imbalances, financial integration, credit, finance, money
    Date: 2015–10
  4. By: Daria Finocchiaro; Giovanni Lombardo; Caterina Mendicino; Philippe Weil
    Abstract: This paper revisits the equilibrium and welfare effects of long-run inflation in the presence of distortionary taxes and financial constraints. Expected inflation interacts with corporate taxation through the deductibility of i) capital expenditures at historical value and ii) interest payments on debt. Through the first channel, inflation increases firms' taxable profits and further distorts their investment decisions. Through the second, expected inflation affects the effective real interest rate, relaxes firms' financial constraints and stimulates investment. We show that, in the presence of collateralized debt, the second effect dominates. Therefore, in contrast to earlier literature, we find that when the tax code creates an advantage of debt financing, a positive rate of long-run inflation is beneficial in terms of welfare as it mitigates the financial distortion and spurs capital accumulation.
    Keywords: optimal monetary policy, Friedman rule, credit frictions, tax benefits of debt
    Date: 2015–10
  5. By: Alan Krause
    Abstract: The increasing international mobility of high-skill individuals is often seen as posing a threat to domestic social welfare, by limiting the ability of governments to tax these individuals and redistribute to the poor. In this note, we examine a simple dynamic nonlinear income tax model without commitment. In this setting, it is shown that the threat of emigration by high-skill individuals facilitates redistribution and increases social welfare in the short run, and has no effect on social welfare over the long run.
    Keywords: nonlinear taxation; migration; commitment.
    JEL: H21 H24 F22
    Date: 2015–10
  6. By: Engelschalk,Michael; Loeprick,Jan
    Abstract: The paper analyzes the design of simplified small business tax regimes in Eastern Europe and Central Asia and the impact of such regimes on small business tax compliance. Although many approaches for tax simplification exist, a general trend in the region is to offer small businesses the option to be taxed based on their turnover instead of net income. The study finds that many of the regimes in place are overly simplistic and neither take into account fairness considerations nor do they facilitate business growth and migration into the standard tax regime. Although revenue generation is not a main objective of such regimes, low revenue performance and the risk of system abuse by larger businesses should be issues of concern. More attention should therefore be devoted to improving the design of simplified regimes and monitoring their application. This will require in particular a more profound analysis of the economic situation and the tax compliance challenges in the small business segment and increased efforts to improve the quality of bookkeeping.
    Keywords: E-Business,Tax Law,Debt Markets,Emerging Markets,Taxation&Subsidies
    Date: 2015–10–19
  7. By: Saxon, Nicholas (U.S. Census Bureau); Tosun, Mehmet S. (University of Nevada, Reno); Yang, Jingjing (University of Nevada, Reno)
    Abstract: There has been an increasing reliance on sales taxation in both the states and counties in the United States. In this paper, we are examining the relationship between state and local sales taxation and business activity in the U.S. by utilizing county-level data for the period 2002-2011. We have found significant negative association between the state and county combined sales tax rate and annual payroll of businesses particularly in the manufacturing sector. There is also evidence of spatial dependence particularly in the payroll response of businesses within the contiguous region. While we found no significant relationship with employment, there is also statistically significant negative association with retail establishments and small establishments with less than 10 employees. It is possible that businesses respond to a sales tax rate increase first, or more directly, by reducing payroll rather than employment. While the economic significance of these results, however, is not found to be overwhelmingly strong, policymakers should still pay attention particularly to how manufacturing businesses respond to sales tax rate tax changes in the form of changes in payroll, and the responses from the small retail establishments.
    Keywords: state and county sales tax, business activity, payroll, employment, number and size of establishments, United States
    JEL: H25 H71 H73 J21
    Date: 2015–10
  8. By: Ethan Ilzetzki (Department of Economics, London School of Economics; Centre for Macroeconomics (CFM))
    Abstract: The political impediments to reform and the forces allowing its success are studied in a model where the tax base and statutory rate are separate instruments of tax policy. The model predicts that big bang reforms - large changes in the tax code - may be easier to enact than marginal reforms. Preferences over the tax base face a tipping point where even the beneficiaries from tax exemptions support re-form. At such a "reform moment", tax reform is Pareto improving. Politically feasible tax reform occurs when fiscal needs are large, but may nonetheless involve reductions in marginal tax rates. There is strategic complementary in lobbying for tax exemptions, resulting in multiple equilibria. Evidence from tax-base changes in a panel of OECD countries supports a number of the main predictions.
    JEL: D72 D78 H26
    Date: 2015–10
  9. By: Bronwyn Hall
    Abstract: Information about the success of a new technology is usually held asymmetrically between the research and development (R&D)-performing firm and potential lenders and investors. This raises the cost of capital for financing R&D externally, resulting in financing constraints on R&D especially for firms with limited internal resources. Previous literature provided evidence for start-up firms on the role of patents as signals to investors, in particular to Venture Capitalists. This study adds to previous insights by studying the effects of firms’ patenting activity on the degree of financing constraints on R&D for a panel of established firms. The results show that patents do indeed attenuate financing constraints for small firms where information asymmetries may be particularly high and collateral value is low. Larger firms are not only less subject to financing constraints, but also do not seem to benefit from a patent quality signal.
    Date: 2014–07
  10. By: Kalina Manova; Zhihong Yu
    Abstract: The fragmentation of production across borders allows firms to make and export final goods, or to perform only intermediate stages of production by processing imported inputs for re-exporting. We examine how financial frictions affect companies' choice between processing and ordinary trade - implicitly a choice of production technology and position in global supply chains - and how this decision affects performance. We exploit matched customs and balance-sheet data from China, where exports are classified as ordinary trade, import-and-assembly processing trade (processing firm sources and pays for imported inputs), and pure-assembly processing trade (processing firm receives foreign inputs for free). Value added, profits and profitability rise from pure assembly to processing with imports to ordinary trade. However, more profitable trade regimes require more working capital because they entail higher up-front costs. As a result, credit constraints induce firms to conduct more processing trade and pure assembly in particular, and preclude them from pursuing higher value-added, more profitable activities. Financial market imperfections thus impact the organization of production across firms and countries, and inform optimal trade and development policy in the presence of global production networks.
    Keywords: China, trade regime, processing trade, global value chain, credit constraints, heterogeneous firms
    JEL: F10 F13 F14 F23 F34 G32
    Date: 2015–10
  11. By: Sybille MERTENS (Chaire Cera Cooperative and Social Entrepreneurship, HEC - Ecole de Gestion de l'Université de Liège, Belgique); Michel MAREE (Centre d'Economie Sociale, HEC - Ecole de gestion de l'Université de Liège)
    Abstract: A social enterprise stands out in comparison with other private providers of goods and services because it is managed according to non-capitalist objectives, which has important consequences in terms of quantification: whether to generate management indicators (profitability ratios, structure ratios, etc.) or to create statistics on a macroeconomic level, conventional measurements often prove to be poorly adapted for providing an accurate quantitative understanding of what a social enterprise produces. In this article, we demonstrate that because of its complexity, the accurate evaluation of the production of social enterprise is hindered by a major conceptual and theoretical problem. We first review how the production of the social enterprise is now taken into account by the conventions of the national accounting. We later illustrate that it is necessary to introduce the notion of “broadened production” if we want to take into account all the dimensions of what the social enterprise really produces. Finally, we concluded by showing how this “broadened production” can unfortunately not be the object of a unique monetary measurement, and that it is therefore necessary to let go of the idea that it would be possible to measure the actual contribution of the social enterprise to the gross domestic product. We instead plead for recognition of the complexity of the production activity of social enterprise and formulate propositions that support the measurement of this production within another framework than national accounting.
    Keywords: social enterprise, production, performance, statistics, national accounting
    JEL: L33 E01
    Date: 2015–05

This nep-acc issue is ©2015 by Alexander Harin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.