nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2018‒10‒29
six papers chosen by

  1. Republic of Belarus; Technical Assistance Report-Work of Mission on Development of Potential in Area of Government Finance Statistics By International Monetary Fund
  2. Productivity measurement, R&D assets and mark-ups in OECD countries By Paul Schreyer; Belen Zinni
  3. Government borrowing cost and balance sheets: do assets matter? By Jemima Peppel-Srebrny
  4. Royalty Taxation under Tax Competition and Profit Shifting By Juranek, Steffen; Schindler, Dirk; Schneider, Andrea
  5. Accrual Basis Landscape: The Absence of Political Will in Preventing Dysfunctional Behaviour in Indonesia By Syarifuddin
  6. Imputing Away the Ladder: Implications of Changes in National Accounting Standards for Assessing Inter-country Inequalities By Jacob Assa; Ingrid H. Kvangraven

  1. By: International Monetary Fund
    Abstract: In coordination with the Republic of Belarus (RB) Ministry of Finance (MF), the latest regular International Monetary Fund (IMF) Statistics Department (STA) mission for providing technical assistance (TA) in the area of government finance statistics (GFS) worked in Minsk November 13–14. That mission’s chief objective was to inventory progress in the area of government finance statistics in the Republic of Belarus since the previous mission and to assist the MF in improving the quality of statistical data. Government finance statistics provide a comprehensive conceptual and accounting basis suitable for the analysis and assessment of fiscal policy, especially the performance of any country’s general government sector (GGS). One of the biggest pluses of implementing GFS methodology in budgeting is achieving coordination among budgeting, financial reporting and statistics. The use of the same terminology by those engaged in budgeting, reporting and statistics guarantees a common understanding among all interested parties. The comparability of numbers, tables and accounts is substantially enhanced, and productivity and the timeliness of data access are thereby increased.
  2. By: Paul Schreyer (OECD); Belen Zinni (OECD)
    Abstract: A key feature of the 2008 revision of the System of National Accounts was the treatment of R&D expenditure as investment. The question arises whether the standard approach towards accounting for growth contribution of assets is justified given the special nature of R&D that provides capital services by affecting the working of other inputs as a whole – akin to technical change and often requires up-front investment with sunk costs. We model R&D inputs with a restricted cost function and compare econometric estimates with those derived under a standard index number approach but find no significant differences. However, we cannot reject the hypothesis of increasing returns to scale. The standard MFP measure is then broken down into a scale effect and a residual productivity effect, each of which explains about half of overall MFP change. The scale effect points to the importance of the demand side and market size for productivity growth. We also compute mark-up rates of prices over marginal cost and find widespread evidence of rising mark-ups for the period 1985-2016.
    Keywords: Mark-ups, Productivity, R&D, Returns to scale
    JEL: D24
    Date: 2018–10–29
  3. By: Jemima Peppel-Srebrny
    Abstract: Abstract Government net worth – total assets less liabilities – has declined considerably relative to national income in a number of OECD countries in recent decades, including the United States, the United Kingdom, Japan and Germany. Notably, however, in thinking about the links between fiscal policy and bond markets, the focus of policy and academic debates has tended to be on the liabilities side of the government balance sheet. Typically, not much attention has been paid to the extent to which any increase in government debt is accompanied by government asset accumulation and hence affects government net worth. Using novel data on both sides of the government balance sheet both for a panel of OECD countries in recent decades and for the United States over the long term, we provide panel data and time series-based evidence that for bond markets, not all government debt is created equal: for explaining government borrowing cost empirically, (i) government assets are significant in addition to government liabilities, and (ii) it is government net worth rather than government liabilities that matters when both are included. The central country-specific fiscal factor driving bond yields hence appears to be government net worth.
    Keywords: Government debt, government assets, fiscal policy, long-term interest rates, OECD countries, United States
    JEL: E44 E62 H54 H63
    Date: 2018–10–18
  4. By: Juranek, Steffen; Schindler, Dirk; Schneider, Andrea
    Abstract: The increasing use of intellectual property as a means to shift profits to low-tax jurisdictions or jurisdictions with so-called `patent boxes' is a major challenge for the corporate tax base of medium- and high-tax countries. Extending a standard tax competition model for capital-enhancing technology, royalty payments, and profit shifting, this paper suggests a simple fix: It is always optimal to set a withholding tax on (intra-firm) royalty payments equal to the corporate tax rate and deny any deductibility of royalties. As the tax applies to the full payment, the problem of identifying the arm's-length component in a digital economy (OECD BEPS Action 1) does not apply. Most importantly, the denial of royalty deductions is the Pareto-efficient solution under coordination and the unilaterally optimal policy under competition for mobile capital. In the latter case, a weakened thin capitalization rule is a crucial part of the policy package in order to avoid negative investment effects. Our results question the ban of royalty taxes in double tax treaties and the EU Interest and Royalty Directive.
    Keywords: source tax on royalties,tax competition,multinationals,profit shifting
    JEL: H25 F23
    Date: 2018
  5. By: Syarifuddin (Faculty of Economics and Business, University of Hasanuddin, Indonesia Author-2-Name: Author-2-Workplace-Name: Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - This research aims to reveal the failure of accrual accounting to create good governance and clean government in local governments in Indonesia. Additionally, the research seeks to examine the increase in accrual based rapid growth in Indonesia and the instance of corruption among government officials. Methodology/Technique - In connection with this objective, the study explains the practical perspective of political intervention during the adoption of accrual accounting and examines the role of the community in the implementation of accrual accounting using a critical phenomenology method. Findings - The findings of this study show that accrual-based accounting encourages deviant behaviour within the public sector and hence, good governance and clean government cannot be achieved. Accrual basis in this regard becomes a means for actors to conceal fraud by exploiting the weaknesses of accrual-based accounting to allow for creative accounting. Novelty - This study uses a qualitative method to describe the implementation of accrual-based accounting in local governments in Indonesia, which is a new approach to this phenomenon.
    Keywords: Accrual; Accounting; Public Sector; Good Governance; Clean Government; Indonesia.
    JEL: M10 M14 M19
    Date: 2018–09–30
  6. By: Jacob Assa (Department of Economics, New School for Social Research); Ingrid H. Kvangraven (University of York)
    Abstract: Over the last half century, a large literature has developed on both the nature and the drivers of uneven development. While different methodologies and theoretical approaches to the issue of convergence abound, the use of GDP growth as a measure of economic growth has, remarkably, gone unquestioned. This paper reviews the convergence debates to date, and examines what the changes to the System of National Accounts (SNA) - the international standard for constructing macroeconomic indicators such as GDP - imply for assessing economic convergence. The 1993 and 2008 revisions to the SNA include several major changes to how production is measured - including the reclassification of financial intermediation services, R&D, weapons systems and owner-occupied dwellings as productive activities - all areas in which developed countries have had an advantage in recent decades. We argue that these changes to the production boundary constitute a form of ‘kicking away the ladder,’ i.e. redefining the yardstick of development to fit the new strengths of developed economies. We analyze data series for a range of countries concurrently available under the 1968 SNA, 1993 SNA and 2008 SNA standards. The earlier measure shows a larger and faster convergence of most countries in ‘the Rest’ with those of ‘the West’. Going a step further, we build on Basu and Foley’s (2013) Measured Value-Added concept as a proxy of ‘Core GDP’. This indicator omits any sector for which value-added is imputed based on net incomes, in the absence of an independent measure of output. This allows us to examine more countries and a longer, more consistent time series than concurrent SNA data, but the conclusions are the same - developing countries have caught up more in Core-GDP terms than the contemporary imputation-heavy measure of GDP would suggest. These findings suggest that the current measure of GDP has become decoupled from core employment-generating activities, and is therefore a misleading measure of growth in an economy. Furthermore, it is inconsistent with the understanding the Sustainable Development Goals of inclusive and sustainable growth. Finally, the paper considers the political economy implications of the changes in GDP methodology, such as the justification of voting shares in international financial institutions, epistemological consequences, and domestic political economy considerations.
    JEL: C82 E01 O1 O47
    Date: 2018–10

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