nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2018‒06‒11
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. "Taking Diversity into Account": Real Effects of Accounting Measurement on Asset Allocation By Gaëtan Le Quang
  2. Corporate Income Taxes Around the World - A Survey on Forward-looking Tax Measures and Two Applications By Elias Steinmüller; Georg U. Thunecke; Georg Wamser
  3. The Effects of Official and Unofficial Information on Tax Compliance By Filomena Garcia; Luca David Opromolla; Andrea Vezzulli; Rafael Marques
  4. How Should Capital Be Taxed? Theory and Evidence from Sweden By Bastani, Spencer; Waldenström, Daniel
  5. The sources of VAT gaps in WAEMU: case studies on Benin and Burkina Faso. By Romain Houssa; Kelbesa Megersa; Roukiatou Nikiema
  6. Getting better? The effect of the single supervisory mechanism on banks' loan loss reporting and loan loss reserves By Ristolainen, Kim
  7. Taxation and the Allocation of Risk Inside the Multinational Firm By Johannes Becker; Niels Johannesen; Nadine Riedel

  1. By: Gaëtan Le Quang
    Abstract: Following a request made by the G20, the IASB begins to work in 2009 on a new accounting standard meant to replace IAS 39: IFRS 9. Among other things, IFRS 9 puts forward a new way of classifying financial instruments that rests on a two-step procedure: a business model assessment and a contractual cash flow characteristics test. We develop a theoretical model that assesses the relevance of this procedure, specifically that of the business model assessment. We show that a mixed accounting regime where financial institutions whose time horizon is short resort to fair value accounting while those whose time horizon is longer resort to historical cost accounting provides a better asset allocation than a pure accounting regime where all FIs resort to the same accounting rule. In other words, business models are worth being taken into consideration when deciding whether an asset should be evaluated at its fair value or at its historical cost, which is in line with the framework presented in IFRS 9.
    Keywords: IFRS 9; Fair Value Accounting, Historical Cost Accounting; Asset Allocation; Real Effects of Accounting; Banks; Insurers
    JEL: G11 G21 G22 M41
    Date: 2018
  2. By: Elias Steinmüller; Georg U. Thunecke; Georg Wamser
    Abstract: This study provides a survey on corporate taxes around the world. Our analysis has three main objectives. First, we collect tax data and calculate (forward-looking) effective tax measures for a large sample of countries and recent years. We particularly describe how these measures vary over time and across countries. Second, we augment the country-level information with firm- and industry-level data (providing weights for financial structure and asset composition) to contrast statutory measures at the level of countries with measures accounting for firm- and industry-specific weights. Third, we utilize our new data to (i) estimate Laffer-Curves, i.e., the relationship between statutory tax rate and tax revenue, based on non-parametric as well as parametric specifications; (ii) examine how taxes affect investment in fixed assets at the level of firms. As for the latter, our preferred specification, in which we use a firm-specific effective marginal tax rate to capture tax incentives, suggests an elasticity of -0.33.
    Keywords: corporate taxes, depreciation allowances, effective marginal (average) tax rates, Laffer-Curve, investment responses
    JEL: H25 H21 F23
    Date: 2018
  3. By: Filomena Garcia; Luca David Opromolla; Andrea Vezzulli; Rafael Marques
    Abstract: The administration of tax policy has shifted its focus from enforcement to complementary instruments aimed at creating a social norm of tax compliance. In this paper we provide an analysis of the effects of the dissemination of information regarding the past degree of tax evasion at the social level on the current individual tax compliance behavior. We build an experiment where, for given levels of audit probabilities, fines and tax rates, subjects have to declare their income after receiving either a communication of the official average tax evasion rate or a private message from a group of randomly matched peers about their tax behavior. We use the experimental data to estimate a dynamic econometric model of tax evasion. The econometric model extends the Allingham-Sandmo-Yitzhaki tax evasion model to include self-consistency and endogenous social interactions among taxpayers. We find four main results. First, tax compliance is very persistent. Second, the higher the official past tax evasion rate the higher the degree of persistence: evaders are more likely to evade again, and compliant individuals are more likely to comply again. Third, when all peers communicate to have evaded (complied) in the past, both evaders and compliant individuals are more likely to evade (comply). Fourth, while both treatments, and especially the unofficial information treatment, are associated, in the context of our experiment, with a significantly larger growth in evasion intensity, the aggregate effect depends on the characteristics of the population. In countries with inherently low levels of tax evasion, official information can have beneficial effects by consolidating the behavior of compliant individuals. However, in countries with inherently high levels of tax evasion, official information can have detrimental effects by intensifying the behavior of evaders. In both cases, the impact of official information is magnified in the presence of strong peer effects.
    Keywords: tax morale, information, tax evasion, experiment, peer effects
    JEL: H26 D63 C24 C92 Z13
    Date: 2018
  4. By: Bastani, Spencer (Uppsala University); Waldenström, Daniel (Paris School of Economics)
    Abstract: This paper presents a comprehensive analysis of the role of capital taxation in advanced economies with a focus on the Swedish experience. We synthesize the existing theoretical literature, present facts about the capital stock and its distribution, review current capital tax practices and empirical findings regarding their effects on economic activity. The paper also examines the political feasibility of capital taxation by presenting results from a unique attitude survey targeted to a large representative sample of the Swedish population. Finally, we tie together our findings and discuss their implications for tax policy.
    Keywords: optimal taxation, capital taxation, wealth tax, inheritance tax, corporate tax, income inequality, wealth inequality, political economy, preferences for redistribution
    JEL: D31 H21 H24
    Date: 2018–04
  5. By: Romain Houssa (CRED, University of Namur); Kelbesa Megersa (CRED, University of Namur); Roukiatou Nikiema (Ouaga II University)
    Abstract: This paper examines the performance of the Value-Added Tax (VAT) in Benin and Burkina Faso since its introduction in the early 1990s. Both countries are witnessing a gradual rise in tax revenue over the study period. The paper also delivers a sectoral breakdown of inefficiencies in VAT-revenue collection in the two countries. We additionally decompose VAT gap in to ‘compliance gap’ and the ‘policy gap’. We find that the sectors responsible for ‘compliance gap’ are largely similar in the two countries. The gaps in VAT collection represent a considerable loss in potential tax revenue. Addressing them will support the ‘Domestic Resource Mobilization’ (DRM) efforts of the two countries.
    Keywords: Value-Added Tax (VAT), Domestic Resources Mobilization (DRM), Tax Reform, Institutional Quality, Economic development
    JEL: H20 H21 H25 H26 O17 O11
    Date: 2017–10
  6. By: Ristolainen, Kim
    Abstract: The recent financial crises have brought into focus questions regarding the quality of banks' assets. We study the patterns in banks reserving for and reporting of loan losses in the EU before and after implementation of the Single Supervisory Mechanism (SSM). We find that banks that 1) have less tier 1 capital, 2) are smaller, 3) are less liquid and 4) have smaller net interest margins either report relatively smaller loan loss reserves or less loan losses, even after including various controls. This supports the hypothesis that financially weaker banks may have a larger incentive to engage in balance sheet window dressing. We further find that the SSM has reduced but not eliminated the under-reserving and under-reporting bias. In addition, there has been a separate positive effect on the overall proportion of nonperforming loans (NPLs) that are realised as losses among the banks that have been under direct supervision by the SSM since implementation of the SSM.
    JEL: G18 G21 G28
    Date: 2018–05–23
  7. By: Johannes Becker; Niels Johannesen; Nadine Riedel
    Abstract: This paper provides the first theoretical and empirical analysis of how taxation shapes the joint allocation of risk and profits inside the multinational firm. Theoretically, we show that unconstrained firms optimally allocate all their risk to high-tax countries to maximize risk sharing with governments and all their profits to low-tax countries to minimize expected tax payments. However, transfer pricing rules requiring risk to be compensated with a higher expected return introduce a trade-off: the risk sharing motive to allocate risk to high-tax countries must be balanced against a pro.t shifting motive to allocate risk to low-tax countries. Empirically, we consistently find that multinational firms disproportionately allocate risk to low-tax countries. This suggests that the intra-firm allocation of risk and profits is effectively constrained by transfer pricing rules and that the profit shifting motive dominates the risk sharing motive. Finally, we show that within-firm differences in risk can account for a significant fraction of the well-established correlation between profits and tax rates suggesting that risk shifting is a quantitatively important channel for profit shifting.
    JEL: H20
    Date: 2018

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