nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2019‒09‒23
six papers chosen by

  1. Homeownership Investment and Tax Neutrality: a joint assessment of income and property taxes in Europe By Figari, Francesco; Verbist, Gerlinde; Zantomio, Francesca
  2. Tax Policies in the European Union: 2018 Survey By European Commission
  3. Multiple equilibria in Lucas (1990)'s optimal capital taxation model with endogenous learning By Li, Fanghui; Wang, Gaowang
  4. Embedded supervision: how to build regulation into blockchain finance By Raphael Auer
  5. Tax audits as scarecrows. Evidence from a large-scale field experiment By Marcelo Bérgolo; Rodrigo Ceni; Guillermo Cruces; Matías Giaccobasso; Ricardo Pérez-Truglia
  6. Household Balance Sheets and Consumption Responses to Income Shocks By Yunho Cho; Aarti Singh; James Morley

  1. By: Figari, Francesco; Verbist, Gerlinde; Zantomio, Francesca
    Abstract: Western countries’ income tax systems exempt the return from investing in owner-occupied housing. Returns from other investments are instead taxed, thus distorting households’ portfolio choices, although it is argued that housing property taxation might act as a counterbalance. Based on data drawn from the Statistics of Income and Living Conditions and the UK Family Resources Survey, and building on tax-benefit model EUROMOD, we provide novel evidence on the interplay of income and property taxation in budgetary, efficiency and equity terms in eight European countries. Results reveal that, even accounting for recurrent housing property taxation, a sizeable ‘homeownership bias’ i.e. a lighter average and marginal taxation for homeownership investment, is embedded in current tax systems, and displays heterogeneous distributional profiles across different countries. Housing property taxation represents only a partial correction towards neutrality.
    Date: 2019–09–16
  2. 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: 2018–12
  3. By: Li, Fanghui; Wang, Gaowang
    Abstract: In the paper we solve the general case of the Lucas (1990) optimal capital taxation model with endogenous growth driven by endogenous learning. We prove Lucas (1990)'s conjecture on zero limiting capital tax and display the possibility of multiple equilibria (i.e., multiple BGPs) in the model.
    Keywords: Multiple Equilibria; Capital Income Tax; Endogenous Growth; Endogenous Learning
    JEL: E62 H21
    Date: 2019–09–10
  4. By: Raphael Auer
    Abstract: The spread of distributed ledger technology (DLT) in finance could help to improve the efficiency and quality of supervision. This paper makes the case for embedded supervision, ie a regulatory framework that provides for compliance in tokenised markets to be automatically monitored by reading the market's ledger, thus reducing the need for firms to actively collect, verify and deliver data. After sketching out a design for such schemes, the paper explores the conditions under which distributed ledger data might be used to monitor compliance. To this end, a decentralised market is modelled that replaces today's intermediary-based verification of legal data with blockchain-enabled data credibility based on economic consensus. The key results set out the conditions under which the market's economic consensus would be strong enough to guarantee that transactions are economically final, so that supervisors can trust the distributed ledger's data. The paper concludes with a discussion of the legislative and operational requirements that would promote low-cost supervision and a level playing field for small and large firms.
    Keywords: tokenisation, asset-backed tokens, stablecoins, cryptoassets, cryptocurrencies, regtech, suptech, regulation, supervision, Basel III, proportionality, blockchain, distributed ledger technology, digital currencies, proof-of-work, proof-of-stake, permissioned DLT, economic consensus, economic finality, fintech, compliance, auditing, accounting, privacy, digitalisation, finance, banking
    JEL: D40 D20 E42 E51 F31 G12 G18 G28 G32 G38 K22 L10 L50 M40
    Date: 2019–09
  5. By: Marcelo Bérgolo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economí­a); Rodrigo Ceni (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economí­a); Guillermo Cruces (Universidad Nacional de La Plata (Argentina). Facultad de Ciencias Económicas. Centro de Estudios Distributivos, Laborales y Sociales.); Matías Giaccobasso (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economí­a); Ricardo Pérez-Truglia (Universidad de California en Los Angeles (EEUU))
    Abstract: The canonical model of Allingham and Sandmo (1972) predicts that firms evade taxes by optimally trading off between the costs and benefits of evasion. However, there is no direct evidence that firms react to audits in this way. We conducted a large-scale field experiment in collaboration with Uruguay’s tax authority to address this question. We sent letters to 20,440 small- and medium-sized firms that collectively paid more than 200 million dollars in taxes per year. Our letters provided exogenous yet nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measured the effect of these signals on their subsequent perceptions about the auditing process, based on survey data, as well as on the actual taxes paid, based on administrative data. We find that providing information about audits had a significant effect on tax compliance but in a manner that was inconsistent with Allingham and Sandmo (1972). Our findings are consistent with an alternative model, risk-as-feelings, in which messages about audits generate fear and induce probability neglect. According to this model, audits may deter tax evasion in the same way that scarecrows frighten off birds.
    Keywords: tax, evasion, audits, penalties, frictions
    JEL: C93 H26 K34 K42 Z13
    Date: 2019–06
  6. By: Yunho Cho (Jinan University); Aarti Singh (University of Sydney); James Morley (University of Sydney)
    Abstract: We examine how households with different balance sheet positions respond to unanticipated transitory and permanent income shocks using panel data from the U.S. and Australia. Our main findings are the following. (i) the consumption response of households with higher debt to a transitory income shock is higher relative to households with lower levels of debt in the U.S. This group of households is distinct from households with low liquid wealth who also respond sensitively to transitory income shocks; (ii) the consumption elasticities from house price shocks are higher for households with higher debt in the U.S.; (iii) our time-varying estimates suggest that consumption of households with higher levels of debt exhibited greater sensitivity to transitory income shocks during the Great Recession and during the housing boom in Australia; and (iv) households with higher net wealth and lower debt have more consumption insurance against permanent income shocks. Our results provide new insights into the relationship between household balance sheets and household consumption and how this relationship has changed over the Great Recession period.
    Date: 2019

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