nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2019‒12‒23
eight papers chosen by

  1. Overhauling corporate taxation in the digital economy By Carpentieri, Loredana; Micossi, Stefano; Parascandolo, Paola
  2. Ukraine; Technical Assistance Report-Distributed Profit Tax; Voluntary Disclosure of Assets; and BEPs Implementation By International Monetary Fund
  3. Christiano Lombogia vOL 6 ED.1 By Lombogia, Christiano
  4. The effectiveness of cyclically adjusted budget rules in the European Union By Sebastiaan Wijsman
  5. A Competitive Audit Selection Mechanism with Incomplete Information By Miloš Fišar; Ondřej Krčál; Jiří Špalek; Rostislav Staněk; James Tremewan
  6. Land value is a progressive and efficient property tax base: Evidence from Victoria By Murray, Cameron; Hermans, Jesse
  8. Malta; Financial Sector Assessment Program-Technical Note-Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) By International Monetary Fund

  1. By: Carpentieri, Loredana; Micossi, Stefano; Parascandolo, Paola
    Abstract: Is the corporate income tax (CIT) still an efficient system for taxing companies today? The CIT was introduced when economies were characterised primarily by tangible assets and goods and by limited international trade. Globalisation, digitalisation and the increasing weight of immaterial goods in company transactions and balance sheets have rendered that system outdated. These radical changes call for equally radical reflections on how to reform the CIT, bearing in mind the need for a corporate tax system that is fit for both the digital and the traditional economy, in developing and developed countries alike. Rather than offering a complete solution, this paper discusses various approaches that could contribute to a solution. First, we suggest that the CIT base should always be strictly aligned with the accounting profit and loss account, eschewing special adjustments for tax purposes. Second, a more radical possibility would be to abandon altogether the reference to corporate income and tax companies instead on cash flow, based on destination. And, third, the possibility could also be explored to tax companies with reference to ‘presumptive’ indicators of activity, rather than on the basis of public accounts. Presumptive indicators are already used in federal systems to allocate corporate income among decentralised jurisdictions. These propositions would not be viable without international agreement, at least at the level of the European Union. Such an agreement may prove difficult given the conflicts of interest between EU member states and between them and the United States.
    Date: 2019–10
  2. By: International Monetary Fund
    Abstract: The mission examined the latest proposal to substitute the current Corporate Profit Tax (CPT) for a Distributed Profit Tax (DPT), in Ukraine also referred to as the Exit Capital Tax (ECT). The mission did not find any new elements to change the position expressed in FAD’s previous technical report on tax policy (May 2017): the proposal is bad tax policy, detrimental for Ukraine on several fronts.
    Keywords: Tax revenue;Tax evasion;Tax incentives;Tax exemptions;Tax assessments;ISCR,CR,related party,DPT,BEPS,SFS,tax treaty
    Date: 2019–11–25
  3. By: Lombogia, Christiano
    Abstract: This study aims to examine the influences of institutional ownership, good corporate governance, and firm size on earning management. Earning management was measured by discretionary accruals, institutional ownership was measured by the stock percentage of institutional, good corporate governance was measured by three variables (composition of independent board of comissioner, audit committee, and KAP size), and firm size was measured by log natural of total sales. This study used the data of 37 manufacturing companies listed in IDX from 2012-2014. The method of data collection used purposive sampling techniques. The data were then analized using multiple regression analysis. The results shows that the institutional ownership and good corporate governance (composition of independent board of comissioner, audit committee, and KAP size) have significant effect on earning management. While firm size has no significant effect on earning management.
    Date: 2019–10–06
  4. By: Sebastiaan Wijsman
    Abstract: This paper presents a game-theoretical model on how revisions of the structural balance affect the implementation of the fiscal rules in the European Union (EU). The structural balance filters the nominal budget balance for influences of the economic cycle and is therefore expected to be a better indicator for fiscal discipline. However, its derivation requires assumptions and estimates on the cyclical influences and the structural balance is as a consequence revised frequently outside the governments’ control. This paper assesses how this affects the effectiveness of fiscal rules. We find that the lack of control over their compliance discourages governments to set compliant budgets. Furthermore, we find that enforcers ignore the structural balance’s value in their assessment of governments’ fiscal discipline. They are uncertain whether noncompliance is due to governments’ decisions or bad luck. As a result, undisciplined governments might be left unsanctioned, while sanctions might be imposed on disciplined governments. We assess our theoretical findings empirically using the European Commission’s national fiscal rules database. However, we do not find evidence that cyclically adjusted budget rules are less effective.
    Keywords: Structural balance, Stability and Growth Pact, Fiscal rules
    Date: 2019–02–28
  5. By: Miloš Fišar (Masaryk University); Ondřej Krčál (Masaryk University); Jiří Špalek (Masaryk University); Rostislav Staněk (Masaryk University); James Tremewan (University of Auckland)
    Abstract: The experimental tax and regulatory compliance literature has shown the effectiveness of competitive audit selection mechanisms (ASMs) based on declarations and a signal of the taxpayers' actual income. However, collecting information about actual income prior to audit selection is costly. In this article, we test the effectiveness of an endogenous ASM based solely on declared income. We show theoretically and in a laboratory experiment that this new endogenous ASM significantly increases compliance in comparison with an ASM where all taxpayers face audit with equal probability. However, a further consequence of conditioning solely on declared income is that poorer taxpayers are audited more frequently, reducing the effectiveness of this ASM in generating revenue and reducing inequality. We further compare the new mechanism with an ASM that also uses a noisy signal of actual income and show that it is a significant improvement over the other two ASMs in terms of compliance, revenue, and inequality. Our results suggest that ASMs that condition only on reported income can increase compliance but should be implemented with caution, and investing in acquiring information before audit selection can have substantial benefits.
    Keywords: Tax compliance, Endogenous audit, Heterogeneous income
    Date: 2019–12–17
  6. By: Murray, Cameron; Hermans, Jesse
    Abstract: Property taxes are a common revenue source for city governments. There are two property tax bases available—land value (site value, SV), or total property value (capital improved value, CIV). The choice of property tax base has implications for both the distribution and efficiency of the tax. We provide new evidence in favour of SV being both the more progressive and efficient property tax base. First, we use three Victorian datasets at different levels of geographic aggregation to model the SV-CIV ratio as a function of various household income measures. At all three levels, a higher SV-CIV ratio occurs in areas with higher incomes, implying that SV is the more progressive property tax base. Our range of results suggests that a one percent increase in the income of an area is associated with a 0.10 to 0.57 percentage point increase in the SV-CIV ratio. Second, we use historical council data to conduct a difference-in-difference analysis to compare the effect of switching from a CIV to SV tax base on the number of building approvals and value of construction investment. We find that switching from CIV to SV as a property tax base is associated with a 20% increase in the value of new residential construction. This is consistent with the view that changes to land value tax rates are non-neutral with respect to the timing of capital investment on vacant and under-utilised land, which we also demonstrate theoretically.
    Date: 2019–11–25
  7. By: Setyawati, Irma; Alamsyah, Doni Purnama
    Abstract: This studies aims to determine the development of Capital Adequacy Ratio, Loan to Deposit Ratio, statutory reserves and net profit before tax in the year 2004-2008. This studies also determine the effect of Capital Adequacy Ratio, Loan to Deposit Ratio, statutory reserves to net income before taxes in PT Bank Mandiri, Tbk 2004-2008. Analysis tool is the multiple regression. The results of this study noted the development of Capital Adequacy Ratio, Loan to Deposit Ratio, statutory reserves and net profit in the year 2004-2008 is likely to increase every year (Post print)
    Date: 2017–11–25
  8. By: International Monetary Fund
    Abstract: This technical note (TN) sets out the findings and recommendations of the Financial Sector Assessment Program (FSAP) for the Republic of Malta in the areas of Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT). It summarizes the findings of a targeted review of several aspects of Malta’s progress in addressing AML/CFT vulnerabilities in the financial sector, specifically the banking sector. A full assessment of the AML/CFT framework against the current Financial Action Task Force (FATF) standard was conducted by MONEYVAL in 2018, and the mutual evaluation report was published in July 2019. 2,3 Although significant steps have been taken to strengthen the AML/CFT regime since the March 2012 fourth round MONEYVAL mutual evaluation report to bring the AML/CFT framework into line with the 2012 FATF standard and improve its effectiveness, overall effectiveness is still lacking. The authorities developed an ambitious national strategy and action plan for prioritizing AML/CFT policies and activities, but it is still in its initial phase of implementation.
    Keywords: Accounting;Anti-money laundering;Arbitrage;Assets;Bank compliance;Bank licensing;Bank supervision;Banking;Banking sector;Banks;Combating the financing of terrorism;Corruption;Credit;Demand;Development;Economic sectors;European Union;Expectations;Financial analysis;Financial assistance;Financial data;Financial institutions;Financial sector;Financial sector oversight;Financial services;Fraud;Gross domestic product;Human capital;Industry;Interconnectedness;Interest;International cooperation;International trade;Investment;Investment policy;Legislation;Liabilities;Money laundering;Need requirement;Open economies;Policy instruments;Poverty;Private sector;Products;Provisioning;Real sector;Risk management;Services;Stocks;Tax evasion;Taxation;Taxes;Terrorism;Terrorism finance;Transparency;ISCR,CR,MFSA,CFT,AML,beneficial owner,IIP
    Date: 2019–11–21

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NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.