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on Accounting and Auditing |
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Issue of 2017‒03‒12
eight papers chosen by |
| By: | Gaëtan Le Quang |
| Abstract: | The global financial crisis and what followed point out at least two major failures of the financial system: its inability to contain liquidity risk and its inability to fund long term investments. We think that these two problems come from the setting up of rules and practices that tend to homogenize market participants’ incentives and behaviors. Fair value accounting is one element of this set of practices and rules. If the rationale behind fair value accounting – that is enhancing transparency in order to limit unreported losses and manipulations – can justify its use in the case of short-term financial institutions (meaning institutions whose time horizon is short because of the maturity of their liabilities) that constantly face the risk of a sudden liquidity need, it seems totally irrelevant when it comes to long-term financial institutions that will not face liquidity needs before ten or twenty years. In this perspective, we develop a model that shows that an accounting regulation that takes the diversity of financial institutions into account offers better results both in terms of liquidity and in terms of efficiency than a regulation that ignores this diversity. |
| Keywords: | Fair value; Banks; Insurers; Diversity. |
| JEL: | G21 G22 M41 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2017-10&r=acc |
| By: | Todtenhaupt, Maximilian; Voget, Johannes |
| Abstract: | We investigate the effect of international differences in corporate taxation on the realization of productivity gains in M&A deals. We argue that tax differentials distort the efficient allocation of productive factors following an M&A and thus mitigate the resulting productivity improvement. Using firm-level data on inputs and outputs of production as well as on corporate M&As, we estimate that a 1 percentage point increase in the absolute tax differential between the locations of two merging firms reduces the subsequent total factor productivity gain by 4.5%. This effect is less pronounced when firms can use international profit shifting to attenuate effective differences in taxation. In a complementary analysis, we use an event study design and a fixed effects model to explore the timing of the response of productivity, as well as, labor and capital input to the tax rate differential after the merger separately for the acquirer and the target. We show that our findings are mainly driven by deals with targets residing in locations with a tax advantage with respect to the acquirer. In these transactions, tax differentials reduce the post-merger adjustment in the target firm and inhibit the full realization of productivity gains. |
| Keywords: | M&A,productivity,international taxation |
| JEL: | F23 G34 H25 D24 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:17014&r=acc |
| By: | Mattéo Godin (CRED, University of Namur); Romain Houssa (CRED, University of Namur); Kelbesa Megersa (CRED, University of Namur) |
| Abstract: | This study presents a case study on the value added-tax (VAT) with the objective to design appropriate policies aiming to improve domestic-resource mobilization in developing countries. Data from 18 DGD-partner countries (past and present) over the 1990-2012 period show that, although the performance of VAT has inproved in recent years, many of these countries can close their resource gap by implementing reforms that improve the efficiency of their VAT system. We present an in-depth analysis on Bolivia to illustrate how such reforms could be designed. Bolivia is also an interesting case since the country was one of the first developing countries to adopt VAT in a context characterized by socio-economic and political challenges. We argue that the credibility of the Bolivian government as well as the institutional design of its tax system were very important for the success of their tax reforms. Moreover, we show that the improvement of both the policy and compliance gaps have contributed to the reduction of Bolivia’s VAT gap in recent years, but improvements in compliance gap are the main deriver. |
| Keywords: | Value Added Tax, Tax gaps, Tax Efficiency, Tax Compliance, Tax Law, Bolivia |
| JEL: | O54 N16 N26 H21 H26 K34 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:nam:befdwp:0116&r=acc |
| By: | Richter, Wolfram F.; Breuer, Markus |
| Abstract: | Taxing intellectual property effectively is a challenging task. With its BEPS initiative the OECD (2013) aims at taxing intangibles in accordance with value creation although difficulties in determining the jurisdiction in which value creation occurs are acknowledged. The European Commission promotes the introduction of a Common Consolidated Corporate Tax Base (CCCTB) to neutralize profit shifting. The drawback of this proposal is that incentives are set to relocate R&D activities to low-tax countries. This is the background against which the present paper pleads for a regulated and internationally coordinated split of the profits earned with licensed know-how. |
| JEL: | H25 O34 M48 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145621&r=acc |
| By: | Wagener, Andreas |
| Abstract: | In fiscal interaction, a policy is evolutionarily stable if, once adopted by all governments, jurisdictions that deviate from it fare worse than those that stick to it. Evolutionary stability is the appropriate solution concept for models of imitative learning (policy mimicking). We show that evolutionarily stable strategies implement identical allocations, regardless of whether jurisdictions use tax rates or expenditure levels as their strategy variable. This is in contrast to the observation that the allocations in the Nash equilibria of games played in tax rates or expenditure levels differ from one another. With evolutionary play, jurisdictions set taxes and expenditures competitively, i.e., they behave as if they were all negligibly small. |
| JEL: | H77 C73 H72 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145579&r=acc |
| By: | Comunale, Mariarosaria |
| Abstract: | We investigate the interactions across current account misalignments, Real Effective Exchange Rate misalignments and financial (or output) gaps within EU countries. We apply panel techniques, including a Bayesian panel VAR, to 27 EU members over the period 1994-2012. We find that, for the euro area, the reaction of current account misalignments to a shock in the Real Effective Exchange Rate misalignments is the largest and the financial gap can influence the current account misalignments more than the output gap. In non-euro area countries and euro periphery an increase in current account misalignments leads to a temporary increase in the Real Effective Exchange Rate misalignments, lowering competitiveness and thus amplifying current account fluctuations. For the core, a raise in the rate or an expansion of the financial gap may help in rebalancing the current account. In the CEE members, an increase in the Real Effective Exchange Rate misalignments may bring larger current account deficits in the medium-long run. JEL Classification: F32, F31, C33 |
| Keywords: | current account, financial gaps, foreign capital flows, panel VAR, real effective exchange rate |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20172026&r=acc |
| By: | Braun, Julia; Zagler, Martin |
| Abstract: | Out of a total of 2,976 double tax agreements (DTAs), some 60% are signed between a developing and a developed economy. As DTAs shift taxing rights from capital importing to capital exporting countries, the prior would incur a loss. We demonstrate in a theoretical model that in a deal one country does not trump the other, but that the deal must be mutually beneficial. In the case of an asymmetric DTA, this requires compensation from the capital exporting country to the capital importing country. We provide empirical evidence that such compensation is indeed paid, for instance in the form of bilateral official development assistance, which increases on average by six million US$ in the year of the signature of a DTA. |
| Keywords: | developing countries,foreign aid,double taxation agreements |
| JEL: | K33 F53 H25 H87 D82 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:17011&r=acc |
| By: | Romain Houssa (CRED, University of Namur); Kelbesa Megersa (CRED, University of Namur) |
| Abstract: | In this paper we test, empirically, to which extend the Value- Added Tax (VAT) is a relevant-policy option for developing countries aiming to improve upon their domestic resources mobilization (DRM). First, we investigate the contribution of VAT to tax collection across developed and developing countries. We also provide a comparative analysis between Sub-Saharan Africa (SSA) and other developing countries. Second, we examine the role of institutional quality in enhancing domestic-tax mobilization in the presence of VAT adoption. For these purposes, we employ a panel data model that takes into account the standard determinants of the tax-effort function as well as the institutional and geographical characteristics of countries. Analysis of data from 149 countries over the 1970 - 2013 period indicates that VAT adoption improved tax-revenue collection in both developed and developing (SSA and non SSA) countries. Moreover, the marginal effect of VAT adoption is estimated to be strong for SSA and other developing countries as compared to their developed counterparts. The positive effect of VAT on tax collection in SSA is reassuring because some earlier studies were not able to identify an overall positive effect for the region. We show that analysis of data over the recent period is important to find a positive effect for SSA. As regards the role of institutional quality, we find that, tax-revenue collection is higher in countries with a betterinstitutional quality - even before VAT adoption. Interestingly, we show that the gain from adopting VAT is maximized in such countries. Given VAT is by now adopted in almost all countries across the world, our findings suggest the need to promote reforms to improve the quality of institutions that facilitate tax collection in developing countries. |
| Keywords: | Value-Added Tax (VAT), Domestic Resources Mobilization (DRM), Tax Reform, Institutional Quality, Economic development |
| JEL: | H20 H21 H25 H26 O17 O11 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:nam:befdwp:0115&r=acc |