nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2018‒01‒01
fifteen papers chosen by

  1. Current accounts and coordination of wage bargaining By Nieminen, Mika; Heimonen, Kari; Tohmo, Timo
  2. R&D policy regimes in France: New evidence from spatio-temporal analysis By Montmartin, B.; Herrera, M.; Massard, N.
  3. Tax Policies in the European Union: 2017 Survey By European Commission
  4. VAT non-compliance in Poland under scrutiny (Problem nieœci¹galnoœci VAT w Polsce pod lup¹) By Grzegorz Poniatowski; dr. Jaros³aw Neneman; Tomasz Michalik
  5. How the European Commission and European countries fight VAT fraud By Tomasz Michalik
  6. Tax avoidance and optimal income tax enforcement By Duccio Gamannossi degl’Innocenti; Matthew D. Rablen
  7. Labor Market Flows: Evidence from Chile Using Micro Data from Administrative Tax Records By Elías Albagli; Alejandra Chovar; Emiliano Luttini; Carlos Madeira; Alberto Naudon; Matías Tapia
  8. The effects of the tax mix on inequality and growth By Oguzhan Akgun; Boris Cournède; Jean-Marc Fournier
  9. Effective Tax Rates and the User Cost of Capital when Interest Rates are Low By Creedy, John; Gemmell, Norman
  10. Malawi; Technical Assistance Report-Strengthening Fundamental Controls and Reporting By International Monetary Fund
  11. Decomposition of Value-Added in Gross Exports:Unresolved Issues and Possible Solutions By Miroudot, Sébastien; Ye, Ming
  12. Efficient audits by pooling projects By Anna Maria C. Menichini; Peter J. Simmons
  13. Explaining the failure of international tax regulations throughout the 20th century By Farquet, Christophe
  14. Population dynamics of tax avoidance with crowding effects By Lorenz, Johannes
  15. Introducing competition in the European rail sector. Insights for a holistic regulatory assessment By Yves Crozet

  1. By: Nieminen, Mika; Heimonen, Kari; Tohmo, Timo
    Abstract: This study provides novel evidence on the impact of labor market institutions on current account dynamics. Our results suggest that a high degree of coordination of wage bargaining has a positive effect on the current account balance over the long run. This result is not driven entirely by wage moderation induced by centralized wage setting, however. A high degree of coordination of wage bargaining is associated with a slower current account adjustment toward its long-run equilibrium. This result seems theoretically plausible; the aggregate shocks in the exporting sector are largely driven by idiosyncratic shocks and the presence of idiosyncratic shocks increases the importance of labor market flexibility. This analysis of the impact of labor market institutions on current account balances complements the existing empirical current account literature focused on macroeconomic and financial measures.
    JEL: F21 F32 F41
    Date: 2017–12–01
  2. By: Montmartin, B.; Herrera, M.; Massard, N.
    Abstract: Using a unique database containing information on the amount of R&D tax credits and regional, national and European subsidies received by firms in French NUTS3 regions over the period 2001-2011, we provide new evidence on the efficiency of R&D policies taking into account spatial dependency across regions. By estimating a spatial Durbin model with regimes and fixed effects, we show that in a context of yardstick competition between regions, national subsidies are the only instrument that displays total leverage effect. For other instruments internal and external effects balance each other resulting in insignificant total effects. Structural breaks corresponding to tax credit reforms are also revealed.
    JEL: H25 O31 O38
    Date: 2017
  3. By: European Commission
    Abstract: This report aims to improve the transparency of the European Semester process by publishing in a clear and accessible format the main indicators used to examine Member States' tax policies, alongside information on recent tax reforms. It also sets out some reform options and examples to act as inspiration for Member States looking to improve the fairness and efficiency of their tax systems.
    Keywords: European Union, taxation
    JEL: H23 H24 H25 H27 H71
    Date: 2017–12
  4. By: Grzegorz Poniatowski; dr. Jaros³aw Neneman; Tomasz Michalik
    Abstract: Since 2009, despite constant growth in the tax base and only slight variations in effective rates, the trend in VAT revenue in Poland has been reversed, and inflows have become less stable. The ongoing decline in VAT collection and the increase in the uncertainty related to the main component of budget revenues is a very important problem, which in the light of growing budget spending may threaten the stability of public finances. Three experts: Grzegorz Poniatowski, dr. Jaros³aw Neneman and Tomasz Michalik examine the structure and the causes of the VAT gap as well as the legal context and possible methods of improving VAT compliance at national and European level.
    Keywords: Economics and Finance, Macroeconomics and Monetary Economics
    JEL: E E02 E5 E6 E42
    Date: 2016–06
  5. By: Tomasz Michalik
    Abstract: The VAT gap, both on the European Union scale and that of particular member states (though not all of them) appeals to the imagination and awakens many extreme emotions. For it is difficult to accept that the level is so significant, and – what is more – in recent years it has narrowed quite insignificantly despite attempts to limit it. In the popular understanding, this gap is quite often identified exclusively with the consequences of fraud, but it has many more component elements, many of which have nothing to do with abuse. Still, this doesn’t change the face that it is precisely fraud and abuse that constitute a particularly significant element of the VAT gap.
    Keywords: Value Added Tax, tax fraud, tax evasion, tax non-compliance, tax avoidance, EU, Poland
    JEL: H26 H25
    Date: 2017–06
  6. By: Duccio Gamannossi degl’Innocenti (Institute for Fiscal Studies); Matthew D. Rablen (Institute for Fiscal Studies and Sheffield University)
    Abstract: We examine the optimal auditing problem of a tax authority when taxpayers can choose both to evade and avoid. For a convex penalty function the incentive-compatibility constraints may bind for the richest taxpayer and at a positive level of both evasion and avoidance. The audit function is non-increasing in reported income, and is higher for progressive tax functions than for regressive tax functions. Higher marginal tax rates increase the incentives for non-compliance, overturning the well-known Yitzhaki paradox.
    Keywords: Tax avoidance, Tax evasion, Optimal auditing, Tax administration
    JEL: H26 K42 D82 H21
    Date: 2017–06–07
  7. By: Elías Albagli; Alejandra Chovar; Emiliano Luttini; Carlos Madeira; Alberto Naudon; Matías Tapia
    Abstract: Using administrative tax records for all formal Chilean firms and employees, we compute and characterize several labor flow measures. Our results show that labor mobility in Chile is large for international standards, with the reallocation rate averaging 37% over the last decade, the highest value among the 25 OECD countries with comparable data. The magnitude of labor reallocation is highly heterogeneous among firms and industries, being highest in Agriculture and Construction. Job reallocation is also high for smaller companies, especially due to high rates of firm creation and destruction, and for firms that pay lower wages. Finally, there is a significant procyclical behavior of workers’ entry rate, and, in smaller magnitude, a countercyclical reaction of the exit rate, which is consistent with international evidence that shows job creation to be the main adjustment mechanism over the business cycle.
    Date: 2017–12
  8. By: Oguzhan Akgun; Boris Cournède; Jean-Marc Fournier
    Abstract: Can reforms that shift the balance among different taxes in the revenue mix lastingly influence the overall prosperity of an economy and the distribution of income across households? The present study takes this question to the data, using the experience of 34 OECD countries over 1980-2014 to assess the effects of changes in the tax structure on the long-term level of average output per capita and the distribution of disposable income across households. Changing the revenue mix while keeping government size constant typically lift long-term output per capita when they involve cuts in the labour tax wedge below or above average incomes, cuts in corporate income taxes or increases in property taxes. The relative-income effects of revenue-neutral reductions in labour tax wedges are broadly in line with intuition: the relative position of those benefitting from them typically improves. In absolute terms, however, nearly all the income distribution benefits from revenue-neutral reductions in labour tax wedges, be they focused on below or average income earners.
    Keywords: growth, household disposable income, inequality, tax, taxation
    JEL: H11 H2 H23 H24 H25 H27
    Date: 2017–12–15
  9. By: Creedy, John; Gemmell, Norman
    Abstract: Interest rates are a key component of both user cost and effective tax rate measures of company taxation, and each is regularly used in empirical tests of tax impacts on investment. However, it is shown that when interest rates are low the two measures are not monotonically related. Using a simulated sample of observations, this feature is found to generate perverse estimates of the effects of taxation on the investment plans of firms.
    Keywords: Interest rates, Company taxation, Business taxes, Investment,
    Date: 2017
  10. By: International Monetary Fund
    Abstract: The government is determined to restore control over public funds. The Fiscal Affairs Department (FAD) of the IMF had identified in 2014 the lack of effective bank reconciliations as a major impediment to achieving this objective and recommended measures to address this deficiency. Reconciling the accounting records with the RBM statements is a fundamental control over bank accounts to, among other things, establish the reliability of the records and to identify promptly any errors and irregularities. The Extended Credit Facility (ECF) incorporated prior actions related to bank reconciliations. This report summarizes the current status of bank reconciliations and makes recommendations for further and sustainable improvements in this area. This report also discusses the need to improve the accounting records, including bank reconciliations, in order that the Integrated Financial Management Information System (IFMIS) can be used effectively for fiscal reporting purposes.
    Keywords: Malawi;Sub-Saharan Africa;
    Date: 2017–11–02
  11. By: Miroudot, Sébastien; Ye, Ming
    Abstract: To better understand trade in the context of global value chains, it is important to have a full and explicit decomposition of value-added in gross exports. While the decomposition proposed by Koopman, Wang and Wei (2014) is a first step in this direction, there are still three outstanding issues that need to be further addressed: (1) the nature of double counting in gross exports; (2) the calculation of the foreign value-added net of any double counting; and (3) the decomposition of gross exports at the industry level (the industry where exports take place). In this paper, we propose a new accounting framework that addresses these different issues and clarifies the definition of exports in inter-country input-output (ICIO) tables. It contributes to the literature: (i) by refining the definition of double-counted value-added in gross exports; (ii) by providing new expressions for the foreign value-added and double-counted terms; and (iii) by indicating how the new framework can be used to decompose exports at the industry level.
    Keywords: Trade accounting, input-output table, Value-added decomposition, Global value chains
    JEL: E01 F14 F23 L14
    Date: 2017–12–12
  12. By: Anna Maria C. Menichini; Peter J. Simmons
    Abstract: In a costly state verification model under commitment, the paper shows that jointly financing multiple independent projects reduces the deadweight loss of inefficient audits. This is true for both simultaneous and sequential audit, since each system reveals the same information about the project outcomes at the same cost. Moreover, the audit combination under sequential audit is indeterminate. Audits are decreasing in the reported income and, for sufficiently high projects profitability, deterministic for lower income reports. We explore robustness of the results, including commitment issues. The results are interpreted in the light of observed features of financial contracts.
    Keywords: contracts, auditing, diversification.
    JEL: D82 D83 D86
    Date: 2017–12
  13. By: Farquet, Christophe
    Abstract: Based on original sources from national and international organizations archives, this paper offers a new perspective on debates on tax evasion in multilateral arenas during the whole 20th Century. A closer look at the cycles of emergence and disappearance of this topic enables to understand why these discussions were raised inside international organizations and why they constantly failed. This paper focuses in particular on the foundation of tax multilateralism at the League of Nations (1922-1928) and the early activities of the OEEC Fiscal Committee (1956-1963), as well as on OECD efforts to increase international cooperation against tax evasion practices from the mid-1970s to the mid-1980s. In three cases, multilateral initiatives against tax evasion faced unyielding opposition by business interests and tax haven countries such as Switzerland. However, in order to explain the failure of the regulations, we have also to take into account the interests of big countries in maintaining offshore activities. Ultimately, the paper demonstrates how international organizations served as multipliers for dominant power relations on issues of international taxation.
    Keywords: History, Taxation, Tax havens, Switzerland, International organizations, OECD
    JEL: N00
    Date: 2016
  14. By: Lorenz, Johannes
    Abstract: There are two ways for taxpayers to avoid paying taxes: legally, through tax optimization and illegally, through tax evasion. The government reacts by altering the law, and by conducting audits, respectively. These phenomena are modeled as a population game, a strategic interaction between all taxpayers: the more taxpayers optimize, the lower the optimization result as a consequence of the government tightening the tax law. The more taxpayers evade, the higher the risk of detection because of the tax agencies increasing the audit probability. If the government reacts to changed optimization behavior with too large a delay, an equilibrium tax law cannot be reached. Tax codes should be updated rapidly in order to avoid a permanent change of the tax law, which is costly both for the legislator and the taxpayers facing legal uncertainty.
    Keywords: tax avoidance,tax evasion,population games
    JEL: C73 H26 K34
    Date: 2017
  15. By: Yves Crozet (IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon, LAET - Laboratoire Aménagement Économie Transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In July 1991, after lengthy negotiations between European countries, EU Directive 91-440 was published, setting in motion the process of deregulating rail transport. As with other networked industries (power, telecommunications), the European Union (EU) was embarking on a new approach, separating infrastructure and operation, at least from an accounting perspective. Once again, the clear objective was to allow third parties access to the network and to make competition a key lever in the revitalisation of the sector. This initial ambition had been pursued for 25 years, as demonstrated by the successive “Railway Packages” or the creation of the European Railway Agency (ERA), which plays an important role in questions of security and interoperability. Development of the role of the ERA is at the heart of the ‘technical’ pillar of the Fourth Railway Package approved at the end of 2015. This fourth package contains a ‘market’ pillar, which seeks to open up national passenger services to competition, from 2020 for on-track competition and 2023 for public service, off-track contracts. The European Commission underlines the fact that the earlier rail packages have already substantially transformed the European rail transport sector. With this fourth package, the generalisation of competition should lead to a single European railway area, which needed if this mode of transport is to achieve the objectives set out in the 2011 White Paper. Given the success of the reforms of the last 25 years, this direction should be pursued. Presented in this way, the matter seems simple, but is it really? What has been the impact of introducing competition and notably on-track competition into rail transport?
    Keywords: EU Directive 91-440,deregulating rail transport,competition,European rail transport sector
    Date: 2016–10–06

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.