nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2019‒04‒15
eight papers chosen by

  1. Tax Administration Reforms: Lessons from Georgia and Uganda By Magumba, Margaret
  2. Tax Professionals: Tax-Evasion Facilitators or Information Hubs? By Battaglini, Marco; Guiso, Luigi; Lacava, Chiara; Patacchini, Eleonora
  3. Tax Expenditure Reporting and Its Use in Fiscal Management; A Guide for Developing Economies By International Monetary Fund
  4. International Debt Shifting: The Value Maximizing Mix of Internal and External Debt By Møen, Jarle; Schindler, Dirk; Schjelderup, Guttorm; Bakke, Julia Tropina
  5. Taxing multinationals: The scope for enforcement cooperation By HINDRIKS Jean,; NISHIMURA Yukihiro,
  6. Central bank balance sheets: misconceptions and realities: remarks at the Credit Suisse Asian Investment Conference, Hong Kong, China, March 26, 2019 By Rosengren, Eric S.
  7. Business Taxation in an Emerging Economy: Analysing Corporate Tax Incidence By Agarwal, Samiksha; Chakraborty, Lekha
  8. The Effect of Corporate Governance on the Relationship between Accounting Quality and Trade Credit: Evidence from Japan By Masahiro Enomoto

  1. By: Magumba, Margaret
    Abstract: Several tax revenue administrations have implemented significant reforms along their journeys with the aim of attaining higher tax revenue collections, improved taxpayer compliance and more efficient service delivery. The results defer from country to country depending on the nature of the reforms implemented and the circumstances surrounding them. This paper analyses and contrasts the tax reforms implemented in Georgia during its post-revolution period (after 2003) with those implemented in Uganda between 1991 and 2014. The analysis seeks to establish why Uganda’s reforms did not achieve as much success as those of Georgia even though the two countries’ reforms had much in common, and to derive key lessons from Georgia’s experience. Whereas there are rational justifications for the difference in results attained from the two countries’ tax reforms, the paper proposes that Uganda – and other countries – can also be successful if similar principles are followed. The key lessons derived from Georgia’s experience include: (1) for tax reforms to be successful, they must be driven by both the tax administration leadership and the overriding government leadership; (2) in order to curb corruption, there must be a transformation of mindset of both tax administrators and taxpayers; (3) early success of tax reforms must be matched with visible improvement in public service delivery in order to ensure sustainability of achievements; (4) tax administrators must be empowered to perform their duties without political interference; (5) tax laws and reforms must be applied uniformly to all taxpayers; and (6) salary increments for tax administrators must be matched with an increased probability of detection of corruption and guaranteed termination of employment should a tax administrator be found guilty of corruption.
    Keywords: Finance, Governance,
    Date: 2019
  2. By: Battaglini, Marco; Guiso, Luigi; Lacava, Chiara; Patacchini, Eleonora
    Abstract: To study the role of tax professionals, we merge tax records of 2.5 million taxpayers in Italy with the respective audit files from the tax revenue agency. Our data covers the entire population of sole proprietorship taxpayers in seven regions, followed over seven fiscal years. We first document that tax evasion is systematically correlated with the average evasion of other customers of the same tax professional. We then exploit the unique structure of our dataset to study the channels through which these social spillover effects are generated. Guided by an equilibrium model of tax compliance with tax professionals and auditing, we highlight two mechanisms that may be behind this phenomenon: self-selection of taxpayers who sort themselves into professionals of heterogeneous tolerance for tax evasion; and informational externalities generated by the tax professional activities. We provide evidence supporting the simultaneous presence of both mechanisms.
    Keywords: tax enforcement; tax evasion
    JEL: H26 K34
    Date: 2019–04
  3. By: International Monetary Fund
    Abstract: This note aims to inform governments on how to account for tax expenditures and use that information in fiscal management. The emphasis is on developing and emerging market economies, where the use of such accounts is in its infancy because of data constraints, insufficient human and financial resources, and weak fiscal institutions. Most developing economies, more-over, do not have tax policy units in their Ministry of Finance to provide analytical support to the govern¬ment and legislature that integrates all revenue policy aspects. As a result, the tax policy framework can be fragmented: line ministries compete in the provision of sectoral tax incentives, but do not report on their cost. The note is organized as follows. The second section outlines the role that tax expenditure measurement and reporting can play in fiscal management. The third section provides a step-by-step approach on how tax expenditure accounts can be built, with emphasis on data, methods and models, and institutional requirements. The section is concerned primarily with the direct cost of tax expenditures—that is, the revenue forgone because of them. It does not deal with their indirect costs, which could include economic efficiency losses and additional tax administration resources, and it does not address assessment of the benefits of tax expenditures. The fourth summarizes the current sta¬tus of tax expenditure reporting in developing econo¬mies, with some reference to advanced economies. The last section concludes.
    Keywords: Fiscal management;Fiscal policy;Tax administration;Taxes;Tax Expenditure,Fiscal Management,Developing Economies,emerging markets
    Date: 2019–03–27
  4. By: Møen, Jarle (Dept. of Business and Management Science, Norwegian School of Economics); Schindler, Dirk (Dept. of Accounting, Auditing and Law, Norwegian School of Economics); Schjelderup, Guttorm (Dept. of Business and Management Science, Norwegian School of Economics); Bakke, Julia Tropina (SNF - Centre for Applied Research at NHH)
    Abstract: We study the capital structure of multinationals and expand previous theory by incorporating international debt tax shield effects from both internal and external capital markets. We show that: (i) multinationals' firm value is maximized if both internal and external debt are used to save tax; (ii) the use of internal and external debt is independent of each other; (iii) multinationals have a tax advantage over domestic firms, which cannot shift debt across international borders. We test our model using a large panel of German multinationals and find that internal and external debt shifting are of about equal importance.
    Keywords: Corporate taxation; multinationals; capital structure; international debt-shifting; tax avoidance
    JEL: F23 G32 H25
    Date: 2019–03–29
  5. By: HINDRIKS Jean, (CORE, Université catholique de louvain); NISHIMURA Yukihiro, (Osaka University)
    Abstract: We present a tax-competition model with two policy instruments: the corporate tax rate and the tightness of tax enforcement (i.e., controls on profit shifting by multinational enterprises). Tougher enforcement increases the cost of profit shifting, and thus mitigates tax competition. In a framework of noncooperative tax choices, we compare the equilibria of the noncooperative and cooperative enforcement choices. After showing that enforcement cooperation may not benefit the low-tax country, we indicate two drivers that promote enforcement cooperation. The first driver of cooperation is complementarity (imperfect substitutability) of countries’ enforcement efforts, taking into account that dispersed enforcement efforts among the involved countries are less effective. We show that cooperation is more likely with greater enforcement complementarity. The second driver of cooperation is tax leadership, which reduces the extent of disagreement on tax enforcement.
    Keywords: profit shifting, tax competition, tax enforcement, weakest-link, tax leadership
    JEL: C72 F23 H25 H87
    Date: 2018–06–05
  6. By: Rosengren, Eric S. (Federal Reserve Bank of Boston)
    Abstract: Federal Reserve Bank of Boston President Eric Rosengren explored misconceptions about the Fed’s balance sheet – the assets the central bank holds, and the liabilities and capital used to finance those assets – in a speech in Hong Kong.
    Keywords: monetary policy; balance sheet; interest rates; financial stability; economic outlook; markets
    Date: 2019–03–26
  7. By: Agarwal, Samiksha; Chakraborty, Lekha
    Abstract: This paper estimates the incidence of corporate taxes in an emerging economy –India- using the data from 5,666 business firms listed in the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) for the period 2000-15. Using the dynamic panel models, we find that capital bear the burden of corporate taxation relatively more than the labour. Our findings highlight that the burden of corporate tax is more on capital than labour. It is also found that the effective tax rate is higher for the small corporate firms than the gigantic firms. Further research is required to understand whether less incidence of corporate taxation on wages in India is due to profit shifting.
    Keywords: corporate tax incidence, dynamic panel, factor mobility, labour, capital, business taxation
    JEL: E6 H22
    Date: 2019–03–01
  8. By: Masahiro Enomoto (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: This study investigates the effect of shareholdings on the relationship between accounting quality and trade credit in Japan. It focuses on cross- and stable shareholdings, which are well-known features of Japanese corporate governance, as a private information sharing system. The relationship between cross- and stable shareholdings, accounting quality, and trade credit is tested. The results reveal that trade credit of customers without either cross- or stable shareholdings increases with accounting quality and that such shareholdings weaken the relationship between accounting quality and trade credit. The findings suggest that a close tie to cross- and stable shareholders results in reducing the importance of accounting information through sharing private information.
    Keywords: Accounting quality, Cross-shareholdings, Stable shareholdings, Trade credit
    Date: 2018–04

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