nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒06‒25
five papers chosen by

  1. Taxation and Investment in India By Alastair Thomas; Isabelle Joumard; Tibor Hanappi; Michelle Harding
  2. What do external statistics tell us about undeclared assets held abroad and tax evasion? By Valeria Pellegrini; Alessandra Sanelli; Enrico Tosti
  3. The Role of nominal wages in trade and current account surpluses By Gustav A. Horn; Fabian Lindner; Sabine Stephan
  4. The effects of the new fiscal rule and creative accounting: Empirical evidence from Japanese municipalities By Hirota, Haruaki; Yunoue, Hideo
  5. Financial Frictions and Export Dynamics in Large Devaluations By Kohn, David; Leibovici, Fernando; Szkup, Michal

  1. By: Alastair Thomas; Isabelle Joumard; Tibor Hanappi; Michelle Harding
    Abstract: Business taxation in India is characterised by high effective tax rates, a narrow tax base, and an uncertain tax environment for potential investors. However, India has now begun a process of significant business tax reform, including a staged reduction of the corporate income tax rate and removal of a range of business tax concessions. This paper sets the scene for these (and further) reforms by examining the taxation of business income in India with a particular focus on its impact on the investment climate. The paper calculates corporate effective tax rates to highlight the impact of the tax system on investment incentives, investigates the narrowness of the current tax base and the proposed base-broadening reforms, and examines the degree of investor certainty as to the tax rules and their application. This Working Paper relates to the 2017 OECD Economic Survey of India ( y-india.htm)
    Keywords: India, investment, taxation
    JEL: H2
    Date: 2017–06–23
  2. By: Valeria Pellegrini (Banca d'Italia); Alessandra Sanelli (Banca d'Italia); Enrico Tosti (Banca d'Italia)
    Abstract: The analysis of international investment position and balance of payments statistics suggests that foreign assets held abroad are greatly underestimated. This paper has three main goals. First, it examines the role played by tax havens in tax evasion. Second, it estimates unreported capital to range globally between $6 trillion and $7 trillion at end-2013, on the basis of mirror statistics on portfolio securities and on cross-border deposits of non-banks. Third, it estimates the portion of tax evasion connected to the underreporting of foreign assets to range between $20 trillion and $42 billion a year over the period 2001-2013 for capital income tax, and between $2.1 trillion and $2.8 trillion at end-2013 for personal income tax. The estimate for personal income tax is based on the assumption that the entire stock of unreported capital outstanding at end-2013 was made up of income that had escaped income tax. Finally, the paper gives a critical assessment of the strengths and weaknesses of the recent policy responses to international tax evasion.
    Keywords: tax evasion, tax haven, international investment, foreign investment, multinational firm, offshore, foreign assets, under-reporting
    JEL: H26 F21 F23 G15
    Date: 2016–11
  3. By: Gustav A. Horn; Fabian Lindner; Sabine Stephan
    Abstract: A macroeconomically oriented wage policy in Germany in the years 2001 to 2015 would have led to a reduced growth of real net exports but would not have significantly reduced Germany's trade and current account surpluses. While real exports would have declined, higher export prices would have led to an increase in overall export receipts so that the current account surplus - denominated in euro terms - would scarcely have shrunk. Such a wage policy, however, would have increased domestic demand and would have influenced income distribution positively (an increase in the wage share). Such a policy would however, have improved the government's financial situation, thereby increasing its spending capacity. A combination of macroeconomic wage policy and a support by fiscal policy making use of the financial leeway created by higher wages would have decreased the nominal trade and current account balance to a greater degree than wage policy alone. Surpluses would mainly have been reduced through an increase in imports due to an improved domestic economic development. However, for the current account balance to be in line with EU rules, much stronger financial impulses would be needed.
    Date: 2017
  4. By: Hirota, Haruaki; Yunoue, Hideo
    Abstract: The purpose of this paper is to analyze creative accounting by stock-flow adjustment in Japanese municipalities after the introduction of a new fiscal rule. We contribute to the literature by analyzing the interdependency of the new fiscal indexes, which comprise three flow indexes and one stock index. Our main contribution is the finding that municipalities tolerated an increase in their stock indexes while they decreased their flow indexes by reducing reserved funds to avoid exceeding the criteria of the new fiscal rule, as the stock index criterion is weaker than that of the three flow indexes.
    Keywords: fiscal rule, creative accounting, stock-flow adjustments
    JEL: H72 H74 H77
    Date: 2017–06–20
  5. By: Kohn, David (Universidad Cat´olica de Chile); Leibovici, Fernando (Federal Reserve Bank of St. Louis); Szkup, Michal (University of British Columbia)
    Abstract: We study the role of financial frictions and balance-sheet effects in accounting for the dynamics of aggregate exports in large devaluations. We investigate a small open economy with heterogeneous firms, where firms face financing constraints and debt can be denominated in foreign units. We find that these channels can explain only a small fraction of the dynamics of exports observed in the data. While these frictions distort production and investment decisions, they affect exports significantly less since firms reallocate sales across markets in response to real exchange rate changes. We document the importance of this mechanism using plant-level data.
    Keywords: Financial frictions; large devaluations; export dynamics; balance-sheet effects.
    JEL: F1 F4 G32
    Date: 2017–05–01

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