nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒08‒27
four papers chosen by

  1. State and Local Pension Plan Funding Sputters in FY 2016 By Jean-Pierre Aubry; Caroline V. Crawford; Alicia H. Munnell
  2. The impact of Basel III on money creation: A synthetic analysis By Xiong, Wanting; Wang, Yougui
  3. Intellectual Property Boxes and the Paradox of Price Discrimination By Ben Klemens
  4. The effect of card payments on vat revenue in Greece By George Hondroyiannis; Dimitrios Papaoikonomou

  1. By: Jean-Pierre Aubry; Caroline V. Crawford; Alicia H. Munnell
    Abstract: The aggregate funded status of state and local pension plans declined in fiscal year (FY) 2016, because liabilities continued to grow steadily while poor stock market performance led to slow asset growth. Thus, the ratio of assets to liabilities fell whether measured by the old Governmental Accounting Standards Board standard (GASB 25), which uses a smoothed value of assets, or by the new standard (GASB 67), which values assets at market. While the new standard has been in effect since 2014, most plans also still report numbers under the traditional rules. As such, this brief provides a multi-year comparison of the two approaches. The discussion is organized as follows. The first section reports that the ratio of assets to liabilities for the 170 plans in the Public Plans Database decreased from 73 percent in 2015 to 72 percent in 2016, as measured by the traditional GASB standard; and from 73 percent to 68 percent, as measured by the new standard. The second and third sections separately evaluate the changes in assets and liabilities, respectively. The fourth section shows that, for the sample as a whole, both the required contribution and the percentage of required contribution paid have remained relatively constant since 2015. The fifth section projects funded ratios for our sample for 2017-2021 under two scenarios of investment performance. Even though 2017 has been a very good year in terms of market returns, plan funded ratios are projected to grow only modestly by 2021 even if plans achieve their assumed returns (currently 7.6 percent on average). The final section concludes that, in order to see more meaningful improvement in funded levels going forward, plans need to set and pay a more sufficient actuarially determined employer contribution, in addition to achieving their assumed returns.
    Date: 2017–07
  2. By: Xiong, Wanting; Wang, Yougui
    Abstract: Recent evidences provoke broad rethinking of the role of banks in money creation. The authors argue that apart from the reserve requirement, prudential regulations also play important roles in constraining the money supply. Specifically, they study three Basel III regulations and theoretically analyze their standalone and collective impacts. The authors find that 1) the money multiplier under Basel III is not constant but a decreasing function of the monetary base; 2) the determinants of the bank's money creation capacity are regulation-specific; 3) the effective binding regulation and the corresponding money multiplier vary across different economic states and bank balance sheet conditions.
    Keywords: money creation,Basel III,liquidity coverage ratio,capital adequacy ratio,leverage ratio,money multiplier
    JEL: E51 G28 G18 E60
    Date: 2017
  3. By: Ben Klemens (U.S. Treasury)
    Abstract: This paper considers the methods by which some existing laws and proposals offer different tax rates to different types of capital, a scheme variously known as a patent box, innovation box, or intellectual property box (IP box). It presents a model of international tax competition—what tax experts call a race to the bottom and competition experts call Bertrand competition—with some capital fixed and some easily moved across borders. The model finds that the highest expected tax revenue from mobile IP for a country hosting a large amount of fixed, non-IP capital comes from assigning a single tax rate to all types of capital—that is, from not implementing an IP box. In the context of Bertrand competition, firms optimize revenue when not engaging in price discrimination across types of customers. As a research and development (R&D) credit, several examples show that the IP box is more easily manipulated than a traditional credit on R&D expenses.
    Date: 2017–03
  4. By: George Hondroyiannis (Bank of Greece and Harokopio University); Dimitrios Papaoikonomou (Bank of Greece)
    Abstract: The effect of card payments on VAT revenue performance in Greece is investigated using quarterly observations on card transactions during 2002q1-2016q2. Time-varying-coefficient methods are employed, in order to study the role of increasing card payments after the imposition of cash restrictions in July 2015. We find that (i) a 1pp increase in the share of card payments in private consumption results in approximately 1% higher revenue through increased compliance; (ii) lowering the VAT rate can generate revenue gains; (iii) card transactions may facilitate tax buoyancy. It is argued that stronger incentives for using card payments in tax evading industries can help lock-in the recent strong revenue performance when cash restrictions are lifted.
    Keywords: VAT; card payments; time-varying-coefficients; Greece
    JEL: E62 H21 H25 H26 K34
    Date: 2017–05

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