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on Accounting and Auditing |
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Issue of 2018‒06‒25
nine papers chosen by |
| By: | Engelbert Stockhammer (Kingston University); Collin Constantine; Severin Reissl |
| Abstract: | The paper proposes a post-Keynesian analysis of the Eurozone crisis and contrasts interpretations inspired by New Keynesian, New Classical, and Marxist theories. The origin of the crisis is the emergence of a debt-driven and an export-driven growth model, which resulted in a rapid increase in private debt ratios and current account imbalances. The reason the crisis escalated in southern Europe, but not in other parts of the world, lies in the unique dysfunctional economic policy regime of the Euro area. European fiscal rules and the Troika impose fiscal austerity on countries in crisis and the separation of fiscal and monetary spaces has made countries vulnerable to sovereign debt crises and forced them to comply. We analyse the role different paradigms attribute to current account imbalances, fiscal policy and monetary policy. Remarkably, opposing views on the relative importance of cost and demand developments in explaining current account imbalances can be found in both heterodox and orthodox economics. Regarding the assessment of fiscal and monetary policy there is a clearer polarisation, with heterodox analysis regarding austerity as unhelpful and large parts of orthodox economics endorsing it. We conclude that there is a weak mapping between post-Keynesian, New Classical, New Keynesian and Marxist theories and different economic policy strategies for the Euro area, which we label Keynesian New Deal, European Orthodoxy, Moderate Reform and Progressive Exit respectively. |
| Keywords: | Euro crisis, European economic policy, sovereign debt crisis, current account balance, fiscal policy, quantitative easing |
| JEL: | B00 E00 E50 E63 F53 G01 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:1617&r=acc |
| By: | Gamannossi degl’Innocenti, Duccio (University of Exeter); Rablen, Matthew D. (University of Sheffield) |
| Abstract: | We relate tax evasion behavior to a substantial literature on self and social comparison in judgements. Taxpayers engage in tax evasion as a means to boost their expected consumption relative to others in their "local" social network, and relative to past consumption. The unique Nash equilibrium of the model relates optimal evasion to a (Bonacich) measure of network centrality: more central taxpayers evade more. The indirect revenue effects from auditing are shown to be ordinally equivalent to a related Bonacich centrality. We generate networks corresponding closely to the observed structure of social networks observed empirically. In particular, our networks contain celebrity taxpayers, whose consumption is widely observed, and who are systematically of higher wealth. In this context we show that, if the tax authority can observe the social network, it is able to raise its audit revenue by around six percent. |
| Keywords: | tax evasion, social networks, network centrality, optimal auditing, social comparison, self comparison, habit, indirect effects, relative consumption |
| JEL: | H26 D85 K42 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11535&r=acc |
| By: | Alexander Guschanski; Engelbert Stockhammer |
| Abstract: | This paper analyses the emergence of current account imbalances as a result of the co-existence of trade flows and financial flows. The literature has tended to view these factors in isolation: many post-Kaleckian models, as well as Net-saving approaches assume that financial flows will adjust to trade flows. Models focusing on financial crises feature a strong role for financial flows but ignore drivers of trade flows. Similarly, empirical analyses either ignore drivers of financial flows or insufficiently capture determinants of trade flows. The paper, first, proposes a simple macroeconomic framework of the current account which gives equal emphasis to trade flows, determined by price competitiveness, and financial flows, determined by asset prices. Second, we test a reduced form of the model for 28 OECD countries for the period 1971-2014. Our results indicate that cost competitiveness as well as asset prices play a role in the determination of current accounts, but asset prices have dominated in the last two decades. |
| Keywords: | current account, financial flows, competitiveness, asset prices |
| JEL: | E12 F32 F41 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:1716&r=acc |
| By: | Diller, Markus; Lorenz, Johannes |
| Abstract: | We propose a game theoretical model where a multinational company with divisions in two countries and the respective tax authorities interact with each other. Prior to an audit the functional profile of the divisions is unknown to the tax authorities. In equilibrium, tax avoidance emerges in both countries. It turns out that the audit pressure is highest for firms with a hybrid functional profile, dampening their production and reducing their after-tax profit. We find that introducing a bilateral Tax Information Exchange Agreement reduces tax avoidance by aggressive transfer pricing in the high-tax ("domestic") country and precludes tax avoidance in the lowtax ("foreign") country. The volume of production increases. The foreign tax authority discontinues its audit activities, while the domestic tax authority audits less often at least if the foreign division is a toll manufacturer ("routine function"). While the expected net tax revenues increase in the foreign country, they may decrease in the domestic country. |
| Keywords: | transfer pricing,tax evasion,cooperation |
| JEL: | H26 F23 K34 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:upadbr:b2917&r=acc |
| By: | Gipper, Brandon (Stanford University); Hail, Luzi (University of Pennsylvania); Leuz, Christian (University of Chicago) |
| Abstract: | This paper provides the first partner tenure and rotation analysis for a large cross-section of U.S. publicly listed firms over an extended period. We analyze the effects on audit quality as well as economic tradeoffs related to partner tenure and rotation with respect to audit hours and fees. On average, we find no evidence for audit quality declines over the tenure cycle and little support for fresh-look benefits after rotations. Nevertheless, partner rotations have significant economic consequences. We find increases in audit fees and decreases in audit hours over the tenure cycle, which differ by partner experience, client size, and competitiveness of the local audit market. More generally, our findings are consistent with efforts by the audit firms to minimize disruptions and audit failures around mandatory rotations. We also analyze special circumstances, such as audit firm switches and early partner rotations, and show that they are more disruptive than mandatory rotations, and also more likely to exhibit audit quality effects. |
| JEL: | J01 J44 L84 M21 M42 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:repec:ecl:stabus:3588&r=acc |
| By: | Hebert, Benjamin (New York University); Davila, Eduardo (Stanford University) |
| Abstract: | We study the optimal design of corporate taxation when firms are subject to financial constraints. We find that corporate taxes should be levied on unconstrained firms, since those firms value resources inside the firm less than financially constrained firms. When the government has complete information about which firms are and are not constrained, this principle is sufficient to characterize optimal corporate tax policy. When the government (and other outsiders) do not know which firms are and are not constrained, the government can use the payout policies of firms to elicit whether or not the firm is constrained, and assess taxes accordingly. Using this insight, we discuss conditions under which a tax on dividends paid is the optimal corporate tax. We then extend this result to a dynamic setting, showing that, if the government lacks commitment, the optimal sequence of tax mechanisms can be implemented with a dividend tax. With commitment, we reach a very different conclusion--a lump sum tax on firm entry is optimal. We argue that these two models demonstrate an underlying principle, that optimal corporate taxes should avoid exacerbating financial frictions, and demonstrate that the structure of the financial frictions can drastically change the optimal policy. |
| JEL: | G18 G33 K35 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:repec:ecl:stabus:3594&r=acc |
| By: | International Monetary Fund |
| Abstract: | This report presents the estimates of tax gaps for general sales tax (GST) and corporate income tax (CIT) in Costa Rica by applying the methodology of the IMF’s RA-GAP (Revenue Administration – Gap Analysis Program). Main findings for GST gap The RA-GAP GST gap methodology was used to estimate the compliance gap and the policy gap for the general sales tax (GST) in Costa Rica for the years from 2012 to 2016. Potential GST revenue under current policy is referred to here as PVC; the difference between PVC and net accrued collections is defined as the compliance gap. The difference between potential revenue under a theoretical GST structure applying the standard rate to all final consumption without any exemptions (referred to as PVR) and PVC is called the policy gap (Figure 1). |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/124&r=acc |
| By: | Mantovani, Daniela |
| Abstract: | In empirical analysis, the Kakwani index is the most frequently used indicator for comparing progressivity across countries and over time. The Kakwani is often assumed to measure to what extent a policy design is targeted to the poor. It has, however, a major drawback: it is not defined for net tax incidence—that is, the whole system of taxes and benefits. Moreover, it is defined over different intervals for different pre-tax income distributions and different average tax rates. This paper proposes an extension to Kakwani index based on the concept of relative redistributive efficiency that is not affected by these drawbacks. The Redistributive Efficiency index was compared to the Kakwani index for taxes/benefits in EU countries by using Euromod baselines. In addition, the Redistributive Efficiency index was computed on the whole tax-benefit system; that is, taxes and benefits were evaluated together. Only Ireland and the UK combine high levels of redistributive efficiency with a relevant amount of tax revenues and social expenditures. They obviously obtain very high redistribution, above 15 points. Most of the countries considered show an intermediate level of redistribution (between 7 and 12 points), but with a different mix. A group of Central and Northern European countries plus Slovenia and Hungary combine medium levels of redistributive efficiency and medium size, while some Southern European countries (Spain and Portugal) and new members compensate a rather low amount of transfer and taxes with quite high levels of efficiency. The remaining new member states and Southern EU countries show a very low level of redistribution, below 7 points. Interestingly, they vary in the level of tax burden and of resources devoted to benefits but all of them show a poor Redistributive Efficiency. This suggests that low Redistributive Efficiency plays a key role in explaining why certain countries perform a limited amount of redistribution. |
| Date: | 2018–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em12-18&r=acc |
| By: | Masahiro Fujimoto |
| Abstract: | Although the growth of share-based payments with performance conditions (hereafter, SPPC) is prominent today, the theoretical price of SPPC has not been sufficiently studied. Reflecting such a situation, the current accounting standards for share-based payments issued in 2004 have had many problems. This paper develops a theoretical SPPC price model with a framework for a marginal utility-based price, which previous studies proposed is the price of contingent claims in an incomplete market. This paper's contribution is fivefold. First, we restricted the stochastic process to a certain class to demonstrate how to consistently change all variables' probability distributions, which affect the SPPC payoff. Second, we explicitly indicated not only the stochastic processes of the stock price process and performance variables under the changed probability, but also how the changes in the performance variables' drift coefficients related to stock betas. Third, we proposed a convenient model in application that uses only a few parameters. Fourth, we provided a method to estimate the parameters and improve the estimation of both the price and parameters. Fifth, we illustrated the problems in current accounting standards and indicated how the theoretical price model can significantly improve them. |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1806.05401&r=acc |