nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒05‒07
five papers chosen by

  1. Tax Policy for Great Society Programs: Tax Expenditure and the Failure of Comprehensive Tax Reform in the United States in 1969 By Seiichiro Mozumi
  2. Towards neutral distribution taxes and vanishing tax effects in the European Union By Maier, Christoph; Schanz, Deborah
  3. Competing for Capital: Auditing and Credibility in Financial Reporting By Raphael Boleslavsky; Bruce I. Carlin; Christopher Cotton
  4. Capital Income Tax, Linear R&D Technology, and Economic Growth By Tenryu, Yohei
  5. Bank stress testing under different balance sheet assumptions By Busch, Ramona; Drescher, Christian; Memmel, Christoph

  1. By: Seiichiro Mozumi (Faculty of Economics, Keio University)
    Abstract: On December 30, 1969, Richard Nixon signed the Tax Reform Act of 1969-originally crafted by the Treasury Department during the presidency of Lyndon B. Johnson-into law. Some scholars who discussed the tax reform have evaluated that it succeeded in making the federal tax system somewhat fairer, simpler, and more equitable, while the others have pointed out that its legislative process exemplified the quandary of comprehensive tax reform; this paper analyzes and demonstrates the conflict regarding with the tax reform between tax reform proponents, such as the Treasury Department and Democrats in Congress, and the Johnson administration. The unenthusiastic Johnson administration, and particularly the CEA's argument of temporary tax surcharge based on "domesticated Keynesianism," delayed the proposal and legislation of the tax reform until the Nixon presidency, and doomed the ideal tax reform that the Treasury crafted on the basis of the concept of "tax expenditures." With greater support of the Johnson administration, the Tax Reform Act of 1969 could have not only made the federal tax system so much fairer and more equitable, but also restored the taxation -expenditure nexus the Kennedy-Johnson tax cut of 1964 had broken.
    Keywords: Comprehensive tax reform, tax expenditures, domesticated Keynesianism
    JEL: H2 N42
    Date: 2017–03–28
  2. By: Maier, Christoph; Schanz, Deborah
    Abstract: The European Union (EU) has no explicit common income tax law. Nevertheless, Court of Justice decisions have driven EU member states to adopt more similar corporate tax systems, and thus, to align the tax treatment of corporate profit distributions - dividends and capital gains. This paper empirically analyzes the influence of the tax preferences of individual and corporate shareholders for the two corporate distribution types - dividends or capital gains - from 1990 to 2012. In the first years of the observation period, European tax systems have provided opposing tax advantages, where individual shareholders have preferred capital gains and corporate shareholders have preferred dividends. To account for these differences depending on the firm's shareholder structure, we derive firm-specific tax preferences for profit distributions. Our empirical analysis reveals that - in line with current literature - the firm-specific tax preferences indeed affect dividend payments. Moreover, we show that in contrast to our detailed study, a simplified approach to measure tax effects on distributions overestimates this influence. In subsequent years, as European Court of Justice decisions have indirectly aligned EU corporate tax systems, we find that tax preferences have converged to a great extent with the tendency to equal tax treatment of dividends and capital gains for both - individual and corporate - shareholder groups. In line with this development, we find that the association of tax preferences and distribution policies vanishes in the last years of the observation period. Our study implies that the EU common regulatory framework, even in the absence of explicit law, can affect corporate distribution decisions and foster neutral taxation of dividends and capital gains across EU member states.
    Keywords: tax preferences,dividends,capital gains,distributions,neutral taxation,corporate tax systems,European Union,European Court of Justice
    JEL: G30 G35 H24 H25
    Date: 2017
  3. By: Raphael Boleslavsky; Bruce I. Carlin; Christopher Cotton
    Abstract: When self-interested agents compete for scarce resources, they often exaggerate the promise of their activities. As such, principals must consider both the quality of each opportunity and each agent’s credibility. We show that principals are better off with less transparency because they gain access to better investments. This is due to a complementarity between the agents’ effort provision and their ability to exaggerate. As such, it is suboptimal for principals to prevent misreporting, even if doing so is costless. This helps explain why exaggeration is ubiquitous during allocation decisions: money management, analyst coverage, private equity fundraising, and venture capital investments.
    JEL: D43 G3
    Date: 2017–03
  4. By: Tenryu, Yohei
    Abstract: This paper shows that, in a R&D-based growth model in which vertical and horizontal innovations occur simultaneously, increasing the capital income tax leads to faster growth. For this result to hold, the production function for both vertical and horizontal innovations must have constant returns to scale.
    Keywords: Endogenous growth, Capital income tax, Vertical innovation, Horizontal Innovation, Scale effect.
    JEL: H20 J22 O31 O40
    Date: 2017–04–22
  5. By: Busch, Ramona; Drescher, Christian; Memmel, Christoph
    Abstract: Using unique supervisory survey data on the impact of a hypothetical interest rate shock on German banks, we analyse price and quantity effects on banks' net interest margin components under different balance sheet assumptions. In the first year, the cross-sectional variation of banks' simulated price effect is nearly eight times as large as the one of the simulated quantity effect. After five years, however, the importance of both effects converges. Large banks adjust their balance sheets more strongly than small banks, but they are impacted more strongly by the price effect. The quantity effects are explained better by a bank's current balance sheet composition, the longer the forecast horizon. The opposite holds for banks' price effect.
    Keywords: stress testing,low-interest-rate environment,net interest margin,static balance sheet,dynamic balance sheet,price effect,quantity effect
    JEL: G11 G21
    Date: 2017

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