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on Accounting and Auditing |
| By: | Evers, Maria Theresia |
| Abstract: | The German Accounting Law Modernization Act (BilMoG) represents a change in paradigm with regard to the traditionally close relationship between financial and tax accounting in Germany. At the same time, requirements on the disclosure of deferred taxes were revised considerably. We make use of these new disclosure provisions to disaggregate firms deferred tax position and to analyze the components of temporary book-tax differences that add to the reporting gap in Germany. To this end, we apply a unique dataset of hand-collected information from individual financial statements for the fiscal year 2010. We find considerable differences between financial and tax accounting and observe that temporary book-tax differences are mainly associated with mandatory differences in accounting for provisions. The scope and quality of tax-related disclosures vary substantially and the overall disclosure quality is low. In order to identify the determinants of the heterogeneity of disclosure quality, we construct an index for voluntary and mandatory disclosure of deferred tax information and conduct multivariate analyses to explain firms disclosure decisions. We show that the recognition of deferred tax assets and liabilities on the face of the balance-sheet is sig-nificantly and positively related with disclosure quality in the notes to the financial statements. Further, our results suggest that larger firms are more likely to have high-quality tax disclosures and that high implementation costs could also explain the ob-served shortfalls in disclosure quality. Moreover, we find that different reporting incen-tives might apply if reporting on losses is assessed in isolation. We use these insights to derive implications for the discussion about whether and how to reform disclosure re-quirements under German GAAP |
| JEL: | H20 H25 M41 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113127&r=acc |
| By: | Brüggemann, Ulf; Bloomfield, Matthew J.; Christensen, Hans B.; Leuz, Christian |
| Abstract: | The paper examines the effect of international regulatory harmonization on cross-border labor migration. We analyze directives in the European Union (EU) that harmonized accounting and auditing standards. This regulatory harmonization should make it less costly for those who work in the accounting profession to move across countries. Our research design compares the cross-border migration of accounting professionals relative to tightly-matched other professionals before and after regulatory harmonization. We find that, on average, labor migration in the accounting profession increases relative to comparable professions by roughly 15% after harmonization. The findings illustrate that diversity in rules constitutes an important economic barrier to cross-border labor mobility and, more specifically, that accounting harmonization can have a meaningful effect on cross-border migration. |
| JEL: | J44 J61 K22 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112850&r=acc |
| By: | Reiter, Franz |
| Abstract: | Corporate tax rates around the world have considerably decreased in the last decades. While tax competition among countries has been widely accepted as the driving force of this trend, it has remained unclear which countries compete with whom. This paper focuses on country size as a determinant of tax competition. My empirical analysis yields two main results: First, the structure of tax competition is based on a country's size as large countries compete with other large countries and small countries compete with small ones. Second, there is a qualitative di erence as large countries compete worldwide with each other whereas small countries mainly orientate towards geographically close other small states. In an extension I show that tax competition between small countries is particularly strong in Europe. |
| JEL: | H25 H87 F23 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113189&r=acc |
| By: | Streif, Frank |
| Abstract: | Corporate tax levels have fallen substantially in Europe during the last decades. There is a broad literature on tax competition which has been identified as one reason for the decline in corporate tax levels. However, none of these studies explicitly ask the question whether tax competition within regions is di erent from tax competition across regions, e.g. due to "global regionalism" of foreign direct investments. This is a crucial question to answer in order to discuss the desirability of (local) tax harmonization, for example, within the European Union. Therefore, the study aims to give hints on the following questions: Is the decline in corporate tax levels in Europe mainly driven by inner-European tax competition? Or is it (also) due to pressure from other world regions? The results of this study which makes use of tax reaction functions (spatial econometrics) indicate that there is evidence for tax competition within Europe (with respect to effective average tax rates) whereas there is no evidence that European countries compete with countries from other regions. |
| JEL: | H20 H77 H87 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112832&r=acc |
| By: | Braun, Julia; Weichenrieder, Alfons |
| Abstract: | Since the mid-1990s, countries offering tax systems that facilitate international tax avoidance and evasion have been facing growing political pressure to comply with the internationally agreed standards of exchange of tax information. Using data of German investments in tax havens, we find evidence that the conclusion of a bilateral tax information exchange agreement (TIEA) is associated with fewer operations in tax havens and the number of German affiliates has on average decreased by 46% compared to a control group. This suggests that firms invest in tax havens not only for their low tax rates but also for the secrecy they offer. |
| JEL: | F21 F23 H87 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:113121&r=acc |
| By: | te Kaat, Daniel Marcel; Dinger, Valeriya |
| Abstract: | Financial crises are usually preceded by large current account deficits. However, the channel through which international capital flows affect financial stability is hardly identified, yet. In this paper, we study the impact of current account balances on bank risk-taking making use of the exogenous and huge variation in capital flows within the euro area between the years 2001 and 2012. We find that bank risk-taking is positively associated with current account deficits. We provide a series of tests showing that this is the case both because banks in countries with large external deficits substitute new investments in asset markets (e.g. sovereign debt) with loans that are typically riskier and because the average quality of bank loans deteriorates. |
| JEL: | F32 F41 G01 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112866&r=acc |
| By: | Schindler, Dirk Steffen; Hopland, Arnt Ove; Lisowsky, Petro; Mardan, Mohammed |
| Abstract: | This paper examines the flexibility of multinational firms to use income-shifting strategies within a tax year to react to operating losses. First, we develop an analytical model that considers how affiliate losses can be adjusted by using the transfer prices of tangible and intangible assets, as well as internal debt shifting, either by ex-post (i.e., by the end of the tax year) or ex-ante income shifting (i.e, before the current tax year). Our model predicts that, due to income shifting, multinational firms report lower profits when running profits, and lower losses when running losses, compared to domestic firms. It also suggests that under ex-post income shifting, loss affiliates have lower transfer prices and internal leverage than profitable affiliates, whereas under ex-ante income shifting, affiliates feature the same transfer prices and internal capital structure, regardless of making losses. Second, using data on direct transfer payments and internal debt of Norwegian affiliates, we find empirical evidence that, under losses, transfer pricing gives substantial flexibility to adjust income shifting ex post. In contrast, we do not find evidence for flexibility in the use of internal debt to shift income ex post. We contribute to the literature that neglecting the precautionary income-shifting behavior of potential loss affiliates underestimates the sensitivity of tax rates to transfer payments and to internal debt, whenever some ex-ante income shifting is present. |
| JEL: | H25 F23 H87 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112972&r=acc |
| By: | Stimmelmayr, Michael; Liberini, Federica; Russo, Antonio |
| Abstract: | Ownership takeovers often follow complex strategies where the control of the target firm is acquired through a sequence of independent contracts. We study the role of capital gain taxes on the contract structure and on the method of finance of merger and acquisitions (M&As). We find that capital gain taxes discourage cash-to-stock transactions and that this effect is stronger in sequential acquisitions. In addition, we show that capital gain taxes promote sequential acquisitions and thus carry a beneficial welfare effect by avoiding the waste of productive resources due to unprofitable mergers. We provide empirical support for the model predictions by estimating a bivariate probit on a sample of acquisition contracts collected from the Thomson Financial SDC database. |
| JEL: | G34 H25 C35 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112926&r=acc |
| By: | Riedel, Nadine; Böhm, Tobias; Karkinsky, Tom; Knoll, Bodo |
| Abstract: | This paper complements a small but growing literature on the effect of corporate taxes on R&D investment and patent holdings. We provide evidence that patent strategies are exploited as a device to shift income to low-tax countries. Using data on the population of corporate patent applications to the European Patent Office, we show that the location of R&D investment and patent ownership is geographically separated in a non-negligble number of cases. We find that countries which levy low patent income taxes attract ownership of foreign-invented patents, especially those patents that have a high earnings potential. Moreover, our results suggest that the probability for a patent to be owned by a party in a tax haven country significantly decreases if the inventor country has implemented controlled foreign company laws. |
| JEL: | H26 H25 H30 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc15:112978&r=acc |
| By: | Fuest, Clemens (ZEW Mannheim); Peichl, Andreas (ZEW Mannheim); Siegloch, Sebastian (University of Mannheim) |
| Abstract: | This paper estimates the incidence of corporate taxes on wages using a 20-year panel of German municipalities. Administrative linked employer-employee data allows estimating heterogeneous worker and firm effects. We set up a general theoretical framework showing that corporate taxes can have a negative effect on wages in various labor market models. Using an event study design, we test the predictions of the theory. Our results indicate that workers bear about 40% of the total tax burden. Empirically, we confirm the importance of both labor market institutions and profit shifting possibilities for the incidence of corporate taxes on wages. |
| Keywords: | business tax, wage incidence, administrative data, local taxation |
| JEL: | H2 H7 J3 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9606&r=acc |