nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2016‒06‒09
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Do tax incentives for research increase firm innovation? An RD design for R&D By Antoine Dechezlepretre; Elias Einiö; Ralf Martin; Kieu-Trang Nguyen; John Van Reenen
  2. Current account and REER misalignments in Central Eastern EU countries: an update using the macroeconomic balance approach By Comunale, Mariarosaria
  3. Compliance in letter and compliance in spirit? - Evidence from board and audit committee meetings in India By Subrata Sarakar
  4. The drivers of differences between growth in GDP and household adjusted disposable income in OECD countries By Jennifer Ribarsky; Changku Kang; Esther Bolton
  5. Algeria; 2016 Article IV Consultation-Press Release and Staff Report By International Monetary Fund
  6. Tax burden optimization on economic agents by modeling interaction in the taxation system By Sokolovskyi, Dmytro; Sokolovska, Olena
  7. EU Budgetary Responses to the ‘Refugee Crisis’: Reconfiguring the Funding Landscape By den Hertog, Leonhard

  1. By: Antoine Dechezlepretre; Elias Einiö; Ralf Martin; Kieu-Trang Nguyen; John Van Reenen
    Abstract: We present the first evidence showing causal impact of research and development (R&D) tax incentives on innovation outcomes. We exploit a change in the asset-based size thresholds for eligibility for R&D tax subsidies and implement a Regression Discontinuity Design using administrative tax data on the population of UK firms. There are statistically and economically significant effects of the tax change on both R&D and patenting, with no evidence of a decline in the quality of innovation. R&D tax price elasticities are large at about 2.6, probably because the treated group is from a sub-population subject to financial constraints. There does not appear to be pre-policy manipulation of assets around the thresholds that could undermine our design, but firms do adjust assets to take advantage of the subsidy post-policy. We estimate that over 2006-11 business R&D would be around 10% lower in the absence of the tax relief scheme.
    Keywords: R&D; patents; tax; innovation; Regression Discontinuity design
    JEL: J24 M0
    Date: 2016–03
  2. By: Comunale, Mariarosaria
    Abstract: Using the IMF CGER methodology, we make an assessment of the current account and price competitiveness of the Central Eastern European Countries (CEEC) that joined the EU between 2004 and 2014. We present results for the “Macroeconomic Balance (MB)” approach, which provides a measure of current account equilibrium based on its determinants together with mis-alignments in real effective exchange rates. We believe that a more refined analysis of the mis-alignments may useful for the Macroeconomic Imbalance Procedure (MIP). This is especially the case for these countries, which have gone through a transition phase and boom/bust periods since their independence. Because such a history may have influenced a country’s performance, any evaluation must take account of each country’s particular characteristics. We use a panel setup of 11 EU new member states (incl. Croatia) for the period 1994-2012 in static and dynamic frameworks, also controlling for the presence of cross-sectional dependence and checking specifically for the role of exchange rate regimes, capital flows and global factors. We find that the estimated coefficients of the determinants meet with expectations. Moreover, the foreign capital flows, the oil balance, and relative output growth seem to play a crucial role in explaining the current account balance. Some global factors such as shocks in oil prices or supply might have played a role in worsening the current account balances of the CEECs. Having a pegged exchange rate regime (or being part of the euro zone) affects the current account positively. The real effective exchange rates behave in accord with the current account gaps, which clearly display cyclical behaviour. The CAs and REERs come close to equilibria in 2012 in most of the countries and the rebalancing is completed for some countries that were less misaligned in the past, such as Poland and Czech Republic, but also for Lithuania. When Foreign Direct Investment (FDI) is introduced as a determinant for these countries, the misalignments are larger in the boom periods (positive misalignments) whereas the negative misalignments are smaller in magnitude.
    Keywords: real effective exchange rate, Central Eastern European Countries, EU new member states, fundamental effective exchange rate, current account
    JEL: F31 F32 C23
    Date: 2015–10–07
  3. By: Subrata Sarakar (Indira Gandhi Institute of Development Research)
    Abstract: This paper analyzes two notions of compliance, 'compliance in letter' and 'compliance in spirit', using data on Board and Audit Committee meetings from India under its Clause 49 corporate governance regulations. The analysis is based on the sample of top 500 companies listed on the country's oldest stock exchange - the Bombay Stock Exchange -- and covers a period of seven years starting from 2006 when the modified version of the clause that contained a large number of corporate governance regulations came into effect in India. The analysis shows that while most of the companies complied with the explicit regulations relating to the number and interval between meetings, a significant percentage of the companies held all their Board and Audit Committee meetings on the same day which is not prohibited under the regulations but unexpected given the onerous responsibilities that same-day meetings put on directors who serve both on the Board and the Audit Committee. The incidence of same-day Board and Audit Committee meetings did not correlate with poor past performance of the company and multiple directorships of directors which could be potential drivers of same-day meeting for generating higher attendance to harness the expertise of as many directors as possible. Instead the incidence of same-day meetings correlated strongly with poor governance structures captured by lower board size, lower percentage of independent directors on the Board and the presence of inside directors in Audit Committees. Same-day Board and Audit Committee meetings did not result in higher meeting attendance by directors. The empirical analysis suggests that while 'compliance in letter' was high, compliance in spirit was low
    Keywords: Corporate Governance, Compliance, Board of Directors, Audit Committee
    JEL: C43 G18 G34 M41 M42
    Date: 2016–05
  4. By: Jennifer Ribarsky; Changku Kang; Esther Bolton
    Abstract: Growth in household income has evolved differently from gross domestic product (GDP) in most OECD countries over the last eighteen years. Using the wealth of information available in the System of National Accounts, this paper provides an assessment of what may be driving this gap. A clear relationship, based on national accounts identities, between GDP and household income exists. This link allows for the calculation of each component’s contribution to the divergence in the growth rates. Based on this deconstruction, differences between the growth rates reflect several underlying effects that (often) offset each other. In many OECD countries, real GDP grew at a faster pace than real household income over the last eighteen years driven by different developments in prices faced by producers versus prices faced by consumers and a rising profit share of corporations. The positive evolution of the other components (such as government intervention) contributed to reducing the gap between the growth rates. Several indicators are investigated to help explain the underlying developments. La croissances des revenus des ménages ont évolué différemment de celle du Produit Intérieur Brut (PIB) dans la plupart des pays de l’OCDE ces 18 dernières années. En utilisant la richesse des informations disponibles dans le Système de Comptabilité Nationale, ce document de travail donne une évaluation de ce qui pourrait être à l’origine de cet écart. Une relation claire, établie sur la base des identités de comptabilité nationale, entre le PIB et le revenu des ménages existe. Cette relation permet le calcul de la contribution de chaque composante à la divergence entre les taux de croissance. À partir de cette déconstruction, les différences entre les taux de croissance reflètent plusieurs effets sous-jacents lesquels (souvent) s’annulent entre eux. Dans de nombreux pays de l’OCDE, le PIB en termes réels a crû à un rythme plus soutenu que le revenu réel des ménages ces 18 dernières années, poussé par des évolutions différentes des prix payés par les producteurs de ceux payés par les consommateurs, ainsi qu’une hausse des taux de marges des sociétés. L’évolution positive des autres composantes (telle que l’intervention gouvernementale) ont contribué à la baisse de l’écart entre les taux de croissance. Plusieurs indicateurs complémentaires sont examinés afin d’expliciter des facteurs sous-jacents.
    Date: 2016–05–20
  5. By: International Monetary Fund
    Abstract: The oil price shock has hit Algeria’s economy hard and exposed the longstanding vulnerabilities of a growth model dependent on hydrocarbon and public spending. The fiscal position—already weakened by a ramp-up in spending in the wake of the Arab Spring—has deteriorated further as oil revenues plummeted. Once-substantial fiscal savings have been nearly depleted to finance large budget deficits. Following several years of comfortable surpluses, the current account balance has swung sharply into deficit and official reserves, while still large, are diminishing. The banking system as a whole appears healthy, but financial stability risks are increasing. The policy response in 2015 was insufficient, but the 2016 budget calls for a sharp reduction in spending, and the authorities have initiated some reforms, including a much needed reform of the subsidy system.
    Keywords: Article IV consultation reports;External shocks;Oil prices;Fiscal consolidation;Fiscal reforms;Monetary policy;Banking sector;Economic indicators;Balance of payments statistics;Debt sustainability analysis;Staff Reports;Press releases;Algeria;
    Date: 2016–05–18
  6. By: Sokolovskyi, Dmytro; Sokolovska, Olena
    Abstract: This paper aims to propose the approach to classify the industries in terms of easiness of tax evasion. Basing on assumptions of taxpayer’s behavior, our results allow defining the type of dependence of real tax rates on their nominal ones. We find that the graph, describing the taxpayer’s behavior, has two key points: maximum – the optimal tax rate (if this rate increase, the real tax revenues fall), and also the point of simple reproduction (after achieving this level, firms stop to pay taxes at all with appropriate shifting into informal sector or closing down). I.e. two key levels of tax burden: «optimal» and «zero» can be defined. The values of those parameters for taxpayers operating in different groups of industries were calculated.
    Keywords: tax burden, economic behavior, tax evasion, game theory
    JEL: C72 G38 H26
    Date: 2016–05–05
  7. By: den Hertog, Leonhard
    Abstract: This paper analyses the EU budgetary responses to the ‘refugee crisis’ in Europe. The European Commission has proposed several changes to the EU budget as well as the establishment of new funding instruments. The paper explores what the announced funding consists of, what role it plays in policy-making and what issues it generates. Throughout these budgetary responses the search for flexibility has been dominant, motivated by the need to respond more swiftly to humanitarian and operational needs. In addition, the paper argues that beyond implementation or management, the role of funding is also symbolic and communicative. In light of limited competences that are difficult to exercise, funding represents a powerful tool enabling the Commission to shape policy-making in times of crisis. At the same time, the dominant search for flexibility also challenges established funding rules and procedures. It has furthermore led to reduced space for democratic scrutiny by the European Parliament. More profoundly, EU funding for cooperation with third countries to prevent the inflow of refugees and asylum seekers has monetised questions over the responsibility for these individuals. As the EU–Turkey agreement shows, this has created a self-imposed dependence on third countries, with the risk of potentially insatiable demands for EU funding. This paper questions the proportionality and rule of law compliance of allocating funding for the implementation of this agreement. Moreover, it proposes that the Commission take steps to practically safeguard the humanitarian aid principles in the management structures of the new funding instruments, and it stresses the need for more scrutiny of the reconfigured funding landscape by the European Parliament and the European Court of Auditors.
    Date: 2016–05

This nep-acc issue is ©2016 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.